What do you know about IND AS 115? How you recognise revenue for construction company

Question

Accepted Answer

IND AS 115 is a revenue recognition standard. Construction companies recognize revenue based on the progress of the construction project.

IND AS 115 is a revenue recognition standard issued by the Institute of Chartered Accountants of India (ICAI).
It provides guidelines on how to recognize revenue from contracts with customers.
For construction companies, revenue recognition is based on the progress of the construction project.
Revenue is recognized over time using the percentage of completion method or upon completion of the project.
The percentage of completion method involves estimating the percentage of work completed and recognizing revenue accordingly.
For example, if a construction project is estimated to be 50% complete, 50% of the total revenue can be recognized.
Upon completion of the project, the remaining revenue can be recognized.
IND AS 115 also requires disclosure of information related to contracts, performance obligations, and significant judgments and estimates.
It aims to provide more transparency and comparability in financial reporting.

Accepted Answer

The 5 step model is applicable. And the last step correlates with percentage of completion method.

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