AS 9 Revenue Recognition: A Practitioner Guide for FY 2026-27
AS 9 (Revenue Recognition) is the Indian Accounting Standard that prescribes when and how companies must recognise revenue from sale of goods, rendering of services, and certain other sources.
The Institute of Chartered Accountants of India (ICAI) issued AS 9 under the Companies (Accounting Standards) Rules, 2006. The Ministry of Corporate Affairs reaffirmed its application in the revised Rules notified in 2021. AS 9 replaced the original ICAI standard from 1985.
For FY 2026-27, AS 9 remains mandatory for all companies not covered by Ind AS. In manufacturing, auditors frequently examine year-end cut-off for FOR-factory versus FOR-destination terms to ensure correct revenue recognition.
AS 9 at a Glance
AS 9 establishes clear rules for recognising revenue in financial statements. Its core principle is that revenue must be recognised only when significant risks and rewards have transferred. The standard primarily serves companies using the Accounting Standards framework (non-Ind AS).
| Field | Value |
|---|---|
| Standard Number | AS 9 |
| Full Name | Revenue Recognition |
| Issuing Body | ICAI (Accounting Standards Board) |
| Notified By | MCA, Companies (Accounting Standards) Rules, 2006 (revised in 2021) |
| Effective Date | Originally 1 April 1991 (mandatory); reaffirmed in Companies (Accounting Standards) Rules, 2021 |
| Supersedes | Original ICAI Accounting Standard issued in 1985 |
| Equivalent Standard | AS 9 ↔ Ind AS 115 ↔ IFRS 15 |
| Applies To | All companies preparing financial statements under the Accounting Standards framework, i.e., not following Indian Accounting Standards (Ind AS). Ind AS-applicable companies use Ind AS 115 instead. |
What is AS 9: Revenue Recognition?
AS 9 sets out when a company must recognise revenue from sales of goods, rendering of services, and income from use of its resources by others such as interest or royalties. The standard requires that revenue is recognised only when significant risks and rewards have transferred to the buyer or service recipient.
ICAI introduced this standard to harmonise revenue recognition practices across Indian companies and prevent premature or inconsistent reporting. It replaced an earlier version from the mid-eighties and aligns conceptually with international frameworks like IFRS 15 but retains some unique features for Indian GAAP users.
Finance teams in non-Ind-AS companies, especially those in manufacturing, distribution, IT services and professional services, regularly apply this standard to ensure accurate timing and presentation of revenue.
Objective of AS 9
- Prescribe the recognition criteria for revenue arising from sale of goods, rendering of services, and use of resources by others yielding interest, royalties, or dividends.
- Provide guidance on the timing of revenue recognition based on transfer of significant risks and rewards.
- Establish disclosure requirements for revenue recognition policies.
These objectives ensure that users receive financial statements reflecting a true and fair view as required by Section 129 of the Companies Act, 2013. Consistent application prevents overstatement or understatement of income across reporting periods.
Who Must Apply AS 9?
Entities covered
AS 9 applies to all companies preparing financial statements under the Accounting Standards (AS) framework, not Ind AS. This includes:
| Entity Type | Applicability |
|---|---|
| Level I enterprises | Mandatory |
| Level II enterprises (SMEs) | Mandatory |
| Level III enterprises (smallest entities) | Mandatory |
Ind AS-applicable companies do not apply AS 9; they follow Ind AS 115 instead.
Scope exclusions
The following are specifically excluded from the scope of AS 9:
- Revenue arising from construction contracts
- Revenue arising from hire-purchase and lease agreements
- Revenue arising from government grants and other similar subsidies
- Revenue of insurance companies arising from insurance contracts
- Gains on disposal of fixed assets, investments or foreign currency holdings
When the standard does not apply
Each exclusion above is governed by a separate standard:
- Construction contracts are covered under AS 7.
- Hire-purchase and lease agreements are governed by AS 19.
- Government grants are dealt with under AS 12.
- Insurance company revenues follow sector-specific guidance.
- Gains on sale/disposal are addressed by relevant standards such as those on fixed assets or investments.
Key Definitions under AS 9
| Term | Definition |
|---|---|
| Revenue | Gross inflow from ordinary activities, sale of goods/services or use by others yielding income |
| Completed service contract method | Recognises service revenue only when contract execution is substantially complete |
| Proportionate completion method | Recognises service revenue proportionately as performance progresses |
| Significant risks and rewards | Ownership-related gains/losses transferred at point triggering revenue recognition |
| Royalties | Charges for use of long-term assets like patents or trademarks |
Recognition and Measurement under AS 9
When to recognise
Revenue is recognised only when it is probable that economic benefits will flow to the enterprise and these benefits can be reliably measured. For sale of goods, this occurs when property in goods transfers to the buyer along with significant risks and rewards. For services, timing depends on whether performance can be measured reliably, either proportionately over time or upon completion.
For interest income, recognition follows time-proportion based on outstanding principal; royalties accrue per agreement terms; dividends are recognised when right to receive arises.
**Formula:**
**Service contract progress (%) = Costs incurred / Total estimated costs**
**Revenue recognised = Progress (%) × Total contract value**
Initial measurement
Revenue is initially measured at consideration received or receivable, i.e., gross inflow before deducting trade discounts or volume rebates. The entity must exclude GST/sales tax collected on behalf of government authorities; these do not form part of revenue.
Trade discounts and volume rebates reduce reported revenue directly rather than being shown as expenses elsewhere in profit & loss.
Subsequent measurement
If collection becomes uncertain after initial recognition, for example due to customer default, the irrecoverable portion is recognised as an expense rather than adjusting previously recorded revenue. If escalation claims or incentives become uncollectible after initial accrual, reversal occurs through expenses.
Revenue cannot be increased retrospectively if additional amounts become collectible unless supported by new enforceable rights arising after reporting date.
Two Methods for Service Revenue Recognition
For service transactions under long-term contracts:
Proportionate completion method:
Recognise revenue proportionally as each act/service milestone completes if progress can be reliably measured.
Completed service contract method:
Recognise all revenue only upon substantial completion where single-act execution or reliable progress measurement is not possible.
Once chosen for a contract type or business line, method selection must remain consistent across periods unless business circumstances change materially.
Worked Examples on AS 9
Example 1: Sale of goods with FOR-destination terms
Krishna Steel Industries dispatches TMT bars worth Rs 3.20 crore to Hyderabad customer on FOR-destination basis on March 28th but customer receives them April 4th next year. Risks/rewards transfer only upon delivery at destination, not dispatch date, so no sales entry appears before March-end.
Computation Table
| Step | Amount | Comment |
|---|---|---|
| Sale value | Rs 3.20 crore | Invoice amount |
| Cost | Rs 2.80 crore | Inventory cost |
| Goods-in-transit at year-end | Rs 2.80 crore | Remain as inventory until delivery |
Journal Entries
On dispatch (28 March):
Dr Goods in Transit Rs 2.80 crore
Cr Inventory Rs 2.80 crore
On delivery/transfer (4 April):
Dr Customer Receivable Rs 3.20 crore
Cr Sales Rs 3.20 crore
>
Dr Cost of Goods Sold Rs 2.80 crore
Cr Goods in Transit Rs 2.80 crore
Example 2: Service contract using proportionate completion method
Sundaram Infotech Pvt Ltd executes an eighteen-month software development contract worth Rs 2 crore; costs incurred till March-end total Rs 80 lakh against total estimated cost Rs 1.20 crore.
Computation Table
| Step | Amount | Comment |
|---|---|---|
| Progress % | = Rs 80 lakh / Rs 1.20 crore = 66.67% | Based on cost-to-cost method |
| Revenue recognised | = 66.67% × Rs 2 crore = Rs 1.33 crore | Proportionate completion |
| Cost recognised | = Rs 80 lakh | Actual cost incurred |
Journal Entries
At period end:
Dr Customer Receivable / Unbilled Revenue Rs 1.33 crore
Cr Service Revenue Rs 1.33 crore
>
Dr Cost of Services Rs 80 lakh
Cr WIP/Salaries/Vendors Rs 80 lakh
Disclosure Requirements under AS 9
Disclosures under AS 9 are mandatory for compliance with Schedule III to the Companies Act, 2013 and to provide users with clarity on revenue recognition policies. Transparent disclosure enables auditors, regulators, and stakeholders to assess the appropriateness of revenue timing and measurement in financial statements.
| Item | Requirement | Para Reference |
|---|---|---|
| Accounting policy followed for revenue recognition | Disclose method (proportionate completion or completed service contract) for service revenue | Para 14 |
| Circumstances under which revenue is postponed | Disclose circumstances and amounts where revenue recognition has been postponed due to uncertainties | Para 14 |
| Basis of revenue recognition for sale of goods | Specifically state when significant risks and rewards are considered transferred | Para 14 |
| Treatment of trade discounts and volume rebates | Disclose policy on netting versus separate disclosure | Para 14 |
| Interest, royalties, and dividends recognition policy | Disclose time-proportionate recognition for interest; accrual basis for royalties; right-to-receive basis for dividends | Para 14 |
| Excise duty and other taxes | Disclose whether revenue is shown gross or net of excise duty and other levies collected on behalf of government | Schedule III + ICAI Guidance |
Auditors must verify that these disclosures are complete and consistent with accounting records as part of their opinion under SA 700.
Common Mistakes & Industry-Specific Considerations
Common errors auditors flag
- Recognising revenue at dispatch when sale terms are FOR-destination (risks and rewards have not yet transferred)
- Including GST and other indirect taxes collected on behalf of government in revenue figures
- Not netting off trade discounts and volume rebates from revenue
- Inconsistent application of proportionate completion versus completed service contract method across similar service contracts
- Recognising revenue on bill-and-hold transactions without confirming all four conditions for transfer of risks and rewards
- Applying AS 9 to entities that should be on Ind AS 115 (i.e., Ind AS-applicable companies)
Industry application notes
In manufacturing, FOR-factory versus FOR-destination terms directly affect year-end cut-off. Auditors test goods-in-transit at year-end to ensure that companies recognise revenue in the correct accounting period as per AS 9.
For IT services, time-and-material contracts typically use the proportionate completion method based on hours billed. Fixed-price contracts may use either method depending on whether progress can be reliably measured. Cost overruns require provisions under AS 29.
Distribution and FMCG companies must net volume rebates, scheme discounts, and trade incentives from reported revenue. Presenting these as marketing expenses instead overstates both income and expenses, an error frequently observed in audit practice.
AS 9 vs Ind AS 115 vs IFRS: Key Differences
The table below summarises how AS 9 compares with Ind AS 115 (Revenue from Contracts with Customers) and IFRS 15 across major aspects:
| Aspect | AS | Ind AS | IFRS |
|---|---|---|---|
| Revenue recognition framework | AS 9 (transaction-based) plus AS 7 for construction | Ind AS 115 (single 5-step performance-obligation model) | IFRS 15 (same as Ind AS) |
| Variable consideration | Limited specific guidance; recognise when measurable | Expected value or most likely amount, with constraint | Same as Ind AS |
| Bundled contracts | Recognised as a whole; limited unbundling guidance | Mandatory identification of distinct performance obligations and price allocation | Same as Ind AS |
| Service revenue methods | Proportionate completion or completed service contract | Over-time or point-in-time based on transfer of control | Same as Ind AS |
| Significant financing component | Not separately addressed | Adjust transaction price if more than 12 months | Same as Ind AS |
| Disclosure depth | Limited (one paragraph) | Extensive (Para 110-129 of Ind AS 115) | Same as Ind AS |
India’s Accounting Standards framework retains a transaction-based approach under AS 9, while Ind AS 115 adopts the global five-step model aligned with IFRS 15. The transition to Ind AS brings deeper disclosure requirements, explicit rules on bundled contracts, variable consideration, and financing components, areas not addressed by legacy Indian GAAP.
Latest Amendments to AS 9 (FY 2026-27)
No amendments have been notified to AS 9 for FY 2026-27 as of 2026-05-02. The standard continues to apply in its existing form.
Related Standards You Should Know
- [Ind AS 115](/ind-as-115-revenue-from-contracts-with-customers/), Replaces both AS 9 and AS 7 for Ind AS-applicable entities under a unified five-step revenue model.
- [AS 7](/as-7-construction-contracts/), Construction contracts are scoped out of AS 9 and covered separately.
- [AS 19](/as-19-leases/), Lease and hire-purchase revenue is excluded from AS 9 and covered by AS 19.
- [AS 12](/as-12-government-grants/), Government grants are excluded from AS 9 and follow AS 12.
- [AS 29](/as-29-provisions-contingent-liabilities/), Provisions for expected losses on contracts are recognised under AS 29 even where AS 9 governs revenue.
Need Help with AS 9 Compliance?
Patron Accounting LLP supports finance teams across India in applying the requirements of AS 9 Revenue Recognition accurately. We help clients avoid common pitfalls flagged by auditors under Schedule III compliance reviews.
Our services include:
- Statutory Audit
- Financial Reporting & Schedule III advisory
- Disclosure Review
- IFRS Conversion
Schedule a 30-minute consultation with our Ind AS team, Pune · Mumbai · Delhi · Gurugram.
Frequently Asked Questions (FAQs)
All companies preparing financial statements under the Accounting Standards framework, excluding those following Indian Accounting Standards (Ind AS), must comply with the requirements of AS 9 Revenue Recognition for FY 2026-27.
Under AS 9, a company recognises revenue from sale of goods only when significant risks and rewards have transferred to the buyer, property in goods has passed, consideration is certain, and collection is reasonably assured.
If sale terms are FOR-factory, risks transfer at dispatch; if FOR-destination, risks transfer only upon delivery at destination. Revenue must be recognised only when risks pass, incorrect cut-off is a common audit finding.
Service income may be recognised using either the proportionate completion method (recognising income as work progresses) or the completed service contract method (recognising all income upon substantial completion), depending on contract nature.
Trade discounts, volume rebates, scheme incentives, or similar reductions must be deducted directly from gross sales when reporting revenue, not shown separately as expenses, to avoid overstating both turnover and costs.
No. GST, sales tax, excise duty or any taxes collected on behalf of government authorities must not form part of reported turnover under Schedule III; only net sales after such levies should appear as “Revenue”.
Yes. Companies must disclose their policy regarding time-proportionate recognition for interest income, accrual basis for royalties earned per agreement terms, and right-to-receive basis for dividends received.
No. Companies required to prepare financial statements under Indian Accounting Standards must apply Ind AS 115 Revenue from Contracts with Customers instead; they do not follow any part of legacy standards like AS 9 or AS 7.
Companies must clearly disclose whether reported sales are presented gross or net of excise duty or similar government levies collected from customers. This ensures comparability across periods and compliance with regulatory presentation norms.
As at May 2026, no amendments have been notified by ICAI or MCA impacting application of Accounting Standard (AS) 9 Revenue Recognition. The standard remains unchanged since reaffirmation in Companies (Accounting Standards) Rules, revised in 2021.
About This Article
Reviewed by CA & CS Team · Patron Accounting LLP
Technical reviewer: CA Sundram Gupta, FCA
Last reviewed: 2026-05-02
Sources: ICAI Compendium of Accounting Standards · MCA Notification (Companies (Accounting Standards) Rules, 2006 (revised in 2021)) · IFRS Foundation