AS 9 - REVENUE

RECOGNITION
Presented by
Pooja Duggal
Saloni Chellani
Prerna Choudhary
Punnet Hemdev
Apurva
Akhil
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OBJECTIVES
Recognition of revenue in the statement of

profit and loss account arising in the ordinary

course of business i.e. from
A. The Sale of Goods
B. The Rendering of Services ; and
C. The use by Others of enterprise resources

yielding interest, royalties and dividends.

APPLICABILITY
This standard does not apply to
1. Revenue

arising

from

Construction

Contracts.
2. Revenue arising from Hire Purchase or Lease
Agreements.
3. Revenue arising from Government Grants or
Other Similar subsidies.
4. Revenue of Insurance Companies arising
from insurance business.
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DEFINITIONS
1) REVENUE

Revenue is the gross inflow of cash, receivables or

other consideration arising in the course of
ordinary activities of an enterprise from the sale of
goods, from the rendering of services and from
the use by others of enterprise resources yielding
interest, royalty and dividend. Revenue is
measured by the charges made to customers or
clients for goods supplied and services rendered
to them and by the charges and rewards arising
from the use of resources by them. In an agency
relationship, the revenue is the amount of
commission and not the gross inflow of cash,
receivable or other consideration.

DEFINITIONS
2) COMPLETED SERVICE CONTRACT

Completed Service Contract method is a

method of accounting which recognises
revenue in the statement of profit and loss only
when the rendering of services under a
contract
is
completed
or
substantially
completed.
3) PROPORTIONATE COMPLETION METHOD

Proportionate completion method is a method

of accounting which recognises revenue in the
statement of profit and loss proportionately
with the degree of completion of services under
a contract.
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A. SALE OF GOODS
The seller has transferred the property in the
goods to the buyer for a consideration.
The transfer of property in goods in most cases
results in or coincides with the transfer of
significant risk and reward of ownership to the
buyer.
There may be the case where transfer of property
in goods does not coincide, the transfer of
significant risk and rewards of ownership.
The time for recognising the revenue in both the
point no. 2 and 3 above, is only when the risks and
reward of ownership is transferred to the buyer.

Example:
The stages of production and sales of a

producer are as follows:

Stage

Acticity

Costs to date

NRV

Raw material

10000

8000

WIP 1

12000

13000

WIP 2

15000

19000

Finished
product

17000

30000

For sale

17000

30000

Sale agreed

17000

30000

Delivered

18000

30000

Paid for

18000

30000

When to recognise the revenue

in following cases?
1. Sales against advance payment received.

When full or partial payment is received for

the goods not presently held in stock i.e.
stock is still to be manufactured or is to be
received directly by the customer from a
third party. Revenue from such sales should
not be recognised until goods are
manufactured, identified and ready for
delivery to the buyer by the third party.
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When to recognise the revenue in

following cases?
2. Delivery delayed at buyers request but

buyer accepts title/billing.

The seller should recognise the revenue
even if goods are not dispatched provided
the goods are ready, buyer takes title and
accepts billing and the seller holds the
goods in his premises on behalf of buyer
i.e. revenue is recognised when risk and
reward of ownership are transferred.
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When to recognise the revenue in

following cases?
3. Barter transactions

Revenue When goods or services are

exchanged or swapped for goods or services
which are of a similar nature and value, the
exchange is not recorded as transaction which
generates revenue but when goods are sold or
services are rendered in exchange for dissimilar
goods or services, the exchange is regarded as
transaction which generates revenue and the
revenue is measured at the fair value of goods or
services received, adjusted by the amount of any
cash or cash equivalent transferred. When the fair
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When to recognise the revenue in

following cases?
value of goods or services received can not
be measured reliably, the revenue is
measured at the fair value of the goods or
services given up, adjusted by the amount of
any cash or cash equivalent transferred.

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B. RENDERING OF SERVICES
Revenue from the rendering of services can
be recognised based on the following two
methods :
1. Proportionate Completion Method

Performance consist of execution of more

than one act. Revenue is recognised based
on the performance of each act. The amount
of revenue to be recognised is determined
based on contract value.
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B. RENDERING OF SERVICES
2. Completed Service Contract Method

Performance consist of execution of single

act. Alternatively, services are performed
in more than a single act and the services
yet to be performed are so significant in
relation to the transaction taken as a whole
that a performance can not be deemed to
have been completed until execution of
those acts. Hence, the revenue is
recognised when sole or final act takes
place and service becomes chargeable.
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Use of resources by others:

Interest: Charges for the use of cash

resourcesor amounts due to the enterprise.

Revenue is recognised on ti,e proportion basis

Royalties: Charges for the usde of such assests

as patents, know how, trade marks and

copyrights.Revenue is recognised on accrual
basis

Dividends: Rewards for the holding of

investments. Revenue is recognised When the

owners right to receive payment is established.

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THANK
YOU!
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