Account Standard 9: Revenue Recognition

This accounting standard is mandatory in nature and is to be applied on all entities.

Revenue means gross inflow of cash and receivables arising from sale of goods, rendering of services or from interest, dividend or royalty it does not include revenue arising from.

• Sale of fixed assets.
• Exchange difference
• Holding gains from current / non current assets
• Remission of liabilities

 Revenue recognition means timings of recording of revenue in the normal course of transactions.

Sale of goods:-  Revenue from sale of goods should be recognized if all of the following conditions are satisfied:

• Ownership of goods is transferred to buyer, generally ownership gets transferred through invoice.
• Risk and rewards incident to ownership have been transferred. Generally risk and reward gets transferred by delivery of goods.
• There should be no uncertainty in consideration and its collection.

Rendering of services:
Revenue from services is recognized if all the following conditions are satisfied.

• Service has been performed:-

It means services have been rendered wholly or partially. Revenue can be recognized on completed contract method or percentage of completion method. Under completed contract method revenue is recognized when services have been wholly provided.

Under percentage of completion method, revenue is recognized on the basis of proportion of service provided.

• There should be no uncertainty regarding consideration and its collection.

Revenue from dividend, interest and royalty:

Revenue is recognized from dividend interest and royalty if all the following conditions are satisfied.

• There should be no uncertainty regarding consideration and its ultimate collection.
• Performance has been completed.
• Dividend right to receive dividend has been established.
• Interest time period has expired.
• Constitution of royalty agreement has been satisfied.

Revenue from Insurance Claim or Price revision:

Revenue from Insurance Claim or Price revision should be recognized if its collection and amount is certain.

Disclosure Requirements:

• Revenue recognition policy.
• If major revenue has not been recognized the fact should be disclosed.