Industry Note on Analysis of change in income recognition practices before and after implementation of Ind AS 115

Abstract

The Technical Note analyses the impact of Indian Accounting Standard (Ind AS) 115 converged with International Financial Reporting Standard 15 on income recognition practices in Real Estate Sector. Indian Accounting Standard 115 was made applicable from April 2018. The Technical Note also analyses the implications of Ind AS 115 for the business and finance of Real Estate Companies in India. Before April 2018, income recognition practices were governed by the Guidance Note on Guidance Note on Accounting for Real Estate Transactions to whom Indian Accounting Standards (Ind AS) are applicable. The Guidance Note was based on the principles laid down by Ind AS 18 Revenue and Ind AS 11 Construction Contracts. Ind AS 18 provided for principles of revenue recognition while Ind AS 11 provided for accounting for transactions related to construction contracts. After implementation of Ind AS 115 many companies began to recognize income using Project Completion Method while a few companies continued to follow Percentage Completion Method.