Ind AS 115 Revenue from Contracts with Customers: A Practitioner Guide for FY 2026-27
Ind AS 115 (Revenue from Contracts with Customers) is the Indian Accounting Standard that prescribes how companies must recognise revenue arising from contracts with customers. It requires revenue to reflect the transfer of goods or services in amounts representing the consideration expected by the entity.
The Ministry of Corporate Affairs notified Ind AS 115 via the Companies (Indian Accounting Standards) Amendment Rules, 2018. The standard became effective for accounting periods beginning on or after 1 April 2018. Ind AS 115 replaced both Ind AS 11 (Construction Contracts) and Ind AS 18 (Revenue), which are now omitted.
For FY 2026-27, real estate and software companies continue to see significant impact. Real-estate developers must now determine whether control transfers over time or at a point in time, often resulting in later revenue recognition compared to legacy methods.
Ind AS 115 at a Glance
Ind AS 115 establishes a single comprehensive model for recognising revenue from contracts with customers. The core principle is that an entity recognises revenue when it transfers control of goods or services in exchange for consideration. This standard primarily applies to finance teams and statutory auditors in companies following the Indian Accounting Standards framework.
| Field | Value |
|---|---|
| Standard Number | Ind AS 115 |
| Full Name | Revenue from Contracts with Customers |
| Issuing Body | ICAI (Accounting Standards Board) |
| Notified By | MCA, Companies (Indian Accounting Standards) Amendment Rules, 2018, dated 28 March 2018 |
| Effective Date | 1 April 2018 |
| Supersedes | Ind AS 11 (Construction Contracts) and Ind AS 18 (Revenue), both omitted |
| Equivalent Standard | AS 7 + AS 9 ↔ Ind AS 115 ↔ IFRS 15 |
| Applies To | All companies required to follow Ind AS, listed companies, companies with net worth >= Rs 250 crore, and their group entities. |
What is Ind AS 115: Revenue from Contracts with Customers?
Ind AS 115 sets out how and when an entity recognises revenue arising from contracts with customers. The standard’s core principle requires entities to recognise revenue so that it represents the transfer of promised goods or services at an amount reflecting the consideration expected in exchange.
ICAI introduced this standard as part of India’s convergence towards International Financial Reporting Standards (IFRS). It replaces both construction contract and general revenue standards, Ind AS 11 and Ind AS 18, with a unified model based on performance obligations and control transfer. The approach aligns closely with IFRS 15 issued by the International Accounting Standards Board.
Finance professionals, including CFOs, finance teams in listed companies, statutory auditors and CA students, routinely use this standard when preparing or auditing financial statements under the Companies Act, 2013.
Objective of Ind AS 115
The objectives of Ind AS 115 are:
- Establish a single comprehensive framework for revenue recognition from contracts with customers.
- Require revenue to depict the transfer of promised goods or services in an amount that reflects the consideration the entity expects to be entitled to.
- Provide cohesive disclosure requirements enabling users to understand the nature, amount, timing and uncertainty of revenue and cash flows from customer contracts.
By achieving these objectives, financial statements present a true and fair view as required by Section 129 of the Companies Act, 2013. This enhances transparency for users such as investors and regulators who rely on consistent information about an entity’s revenue streams.
Who Must Apply Ind AS 115?
Entities covered, applicability table
Ind AS 115 applies to all companies required by law or regulation to prepare financial statements under Indian Accounting Standards (“Ind AS”). The Ministry of Corporate Affairs has prescribed phased applicability based on company type and net worth:
| Category | Applicability Timeline |
|---|---|
| Listed companies | Mandatory since FY 2016-17 |
| Unlisted companies (net worth ≥ Rs 250 crore) | Mandatory since FY 2016-17 |
| Holding/subsidiary/joint venture/associate of above entities | Same as parent/group timeline |
Private limited companies not meeting these thresholds do not apply Ind AS unless voluntarily opting in.
Scope exclusions
Ind AS 115 does not apply to:
- Lease contracts within the scope of Ind AS 116
- Insurance contracts within the scope of Ind AS 104 / Ind AS 117
- Financial instruments within the scope of Ind AS 109
- Guarantees other than product warranties
- Non-monetary exchanges between entities in the same line of business to facilitate sales to customers
When the standard does not apply
Each exclusion above is covered by a separate standard:
Lease accounting falls under Ind AS 116. Insurance contracts are governed by specific standards, Ind AS 104 or forthcoming updates under Ind AS 117. Financial instruments are addressed by Ind AS 109. Product guarantees may remain within scope; all other guarantees follow their respective guidance. Non-monetary exchanges between similar businesses are outside this standard’s remit.
Key Definitions under Ind AS 115
The following key terms underpin application of this standard:
| Term | Definition |
|---|---|
| Contract | Agreement between two or more parties creating enforceable rights and obligations |
| Customer | Party contracting with an entity for goods or services produced in its ordinary activities |
| Performance obligation | Promise in a contract to deliver distinct goods/services or series thereof |
| Transaction price | Amount expected by entity in exchange for transferring promised goods/services |
| Variable consideration | Consideration subject to discounts, rebates, refunds, credits or performance-linked changes |
| Stand-alone selling price | Price at which a good/service would be sold separately |
| Contract asset / liability | Right to consideration conditional on more than time / obligation for received consideration |
Recognition and Measurement under Ind AS 115
When to recognise
Under Ind AS 115, an entity recognises revenue only when it satisfies a performance obligation by transferring control over a promised good or service to a customer. Control refers not merely to physical possession but also includes legal title, significant risks and rewards, and practical ability for the customer to direct use (Para 31-38).
Revenue may be recognised either at a point in time or over time depending on whether certain criteria are met (Para 35):
The customer simultaneously receives and consumes benefits as performance occurs;
The entity’s performance creates/enhances an asset controlled by the customer;
The entity’s performance does not create an asset with alternative use and has enforceable right to payment for work performed.
If none apply, recognise revenue at a point when control passes, typically upon delivery/handover.
Initial measurement
At inception, measure revenue at the transaction price determined using these five steps:
**5-Step Revenue Recognition Model**
Step 1, Identify contract(s) with customer
Step 2, Identify distinct performance obligations
Step 3, Determine transaction price (including variable consideration subject to constraint per Para 56)
Step 4, Allocate transaction price based on relative stand-alone selling prices
Step 5, Recognise revenue as each obligation is satisfied
Variable consideration is included only if it is highly probable that no significant reversal will occur once uncertainty resolves (Para 56). Significant financing components must be adjusted if payment timing differs substantially from delivery (>12 months).
Subsequent measurement
After initial recognition:
Revenue is updated if there are changes in transaction price due to variable consideration being resolved or contract modifications agreed upon by both parties (Para 87-90). For performance obligations satisfied over time, such as construction contracts, the progress toward satisfaction must be reassessed each reporting period using either output methods (e.g., units delivered) or input methods (e.g., costs incurred).
Contract assets represent rights to consideration already earned but not yet unconditional; contract liabilities arise when payment precedes satisfaction of related obligations. Both must be remeasured at each reporting date based on latest facts.
Costs incurred solely due to obtaining/fulfilling contracts are capitalised if recoverable per Para 91-98; otherwise expensed immediately.
The 5-Step Revenue Recognition Model
The five-step model forms the backbone of compliance:
Identify contract, Must meet criteria set out in Para 9 including approval/commitment by parties.
Identify performance obligations, Distinct promises must be separated; assess whether goods/services can be used independently.
Determine transaction price, Includes fixed amounts plus variable elements constrained appropriately.
Allocate transaction price, Allocation uses relative stand-alone selling prices; discounts/variable amounts allocated per Para 81-86.
Recognise revenue, As each obligation is satisfied either over time or at point-in-time based on control transfer analysis.
This method ensures that reported revenue aligns closely with underlying economic activity rather than arbitrary milestones or cash receipts, a frequent issue observed during audits prior to adoption of this model.
Worked Examples on Ind AS 115
Example 1: Bundled hardware + software + support contract
Scenario: Sundaram Infotech Pvt Ltd sells enterprise hardware bundled with proprietary software plus three years’ support for Rs 1.20 crore total contract value. Stand-alone selling prices are hardware Rs 80 lakh; software Rs 30 lakh; support Rs 30 lakh.
Computation Table
| Component | Stand-Alone Selling Price (Rs lakh) | Allocated Contract Value (Rs lakh) |
|---|---|---|
| Hardware | ₹80 | ₹68.57 (= ₹120 × ₹80/₹140) |
| Software | ₹30 | ₹25.71 (= ₹120 × ₹30/₹140) |
| Support | ₹30 | ₹25.71 (= ₹120 × ₹30/₹140), spread over three years |
Journal Entries
On hardware delivery:
Dr Receivable ₹68.57 lakh / Cr Revenue ₹68.57 lakh
On software delivery:
Dr Receivable ₹25.71 lakh / Cr Revenue ₹25.71 lakh
Support service:
Recognise ₹8.57 lakh per year over three years as service rendered.
Example 2: Construction contract, over-time recognition
Scenario: Maharashtra Infrastructure Ltd undertakes a turnkey project valued at Rs 50 crore total contract price; estimated total cost is Rs 40 crore; costs incurred till March-end are Rs 18 crore.
Computation Table
| Metric | Amount (Rs crore) | Calculation |
|---|---|---|
| Costs incurred | ₹18 | Actual till date |
| Estimated total cost | ₹40 | Projected |
| Percentage complete | \(45\%\) | \(₹18 ÷ ₹40\) |
| Revenue recognised | ₹22.50 | \(45\% × ₹50\) |
| Cost recognised | ₹18 | As above |
| Margin recognised | ₹4.50 | \(₹22.50, ₹18\) |
Journal Entries
Dr Contract Asset / Customer Receivable Rs 22.50 crore / Cr Contract Revenue Rs 22.50 crore
Dr Cost of Contract Rs 18 crore / Cr WIP / Materials etc Rs 18 crore
Disclosure Requirements under Ind AS 115
Ind AS 115 prescribes extensive disclosure requirements to ensure users of financial statements receive clear, comparable information about revenue streams. Schedule III to the Companies Act, 2013, mandates these disclosures for all Ind AS-compliant companies. Proper disclosure enables stakeholders to understand the nature, timing, and uncertainty of revenue and related cash flows.
| Item | Requirement | Para Reference |
|---|---|---|
| Disaggregation of revenue | Disclose categories that depict how revenue is affected by economic factors | Para 114 |
| Contract balances, opening and closing balances of contract assets, contract liabilities and receivables | Reconciliation | Para 116 |
| Revenue recognised in the period that was included in opening contract liability | Quantitative disclosure | Para 116(b) |
| Information about performance obligations, when typically satisfied, payment terms, returns, warranties | Qualitative narrative | Para 119 |
| Aggregate transaction price allocated to remaining performance obligations | With expected timing of recognition | Para 120 |
| Significant judgements affecting timing and amount of revenue | Disclose method, inputs and changes | Para 123 |
| Costs to obtain or fulfil a contract, closing balance and amortisation | If capitalised | Para 128 |
Auditors must verify Ind AS 115 disclosures as part of their opinion on true and fair presentation under SA 700.
Common Mistakes & Industry-Specific Considerations
Common errors auditors flag
- Failure to identify all distinct performance obligations within a bundled contract.
- Incorrect classification of an entity as principal vs agent in the value chain.
- Recognising variable consideration without applying the constraint in Para 56.
- Using contract-level rather than performance-obligation-level revenue recognition.
- Inadequate assessment of whether control transfers over time or at a point in time.
- Failure to capitalise contract acquisition costs when they meet the Para 91 criteria.
Industry application notes
Real estate: Developers must determine whether control transfers over time (continuous transfer) or at a point in time (handover). Under Ind AS 115, many real-estate projects now recognise revenue only on handover rather than percentage-of-completion, significantly shifting reported results compared to legacy ICAI Guidance Note methods.
Telecom: Bundled contracts combining handset sales with service plans require explicit allocation between handset (point-in-time) and service (over-time) obligations. The allocation uses stand-alone selling prices, impacting both timing and quantum of recognised revenue for telecom operators.
Software / SaaS: Entities must assess whether subscription access, implementation services, or customisation are distinct. Term licences may trigger point-in-time recognition, while SaaS access is typically over time. This distinction directly affects when software companies report revenue.
Ind AS 115 vs AS 7 + AS 9 vs IFRS: Key Differences
The following table summarises key differences among Indian GAAP (AS 7/AS 9), Ind AS 115, and IFRS 15:
| Aspect | AS | Ind AS | IFRS |
|---|---|---|---|
| Revenue recognition model | AS 9 (transaction-based) + AS 7 (% of completion for construction) | Single 5-step performance-obligation model | Same as Ind AS |
| Variable consideration | Limited guidance | Expected value or most likely amount, with constraint | Same as Ind AS |
| Significant financing component | Not separately addressed | Adjust transaction price if >12 months | Same as Ind AS |
| Contract asset / contract liability | Not used | Distinct line items in balance sheet | Same as Ind AS |
| Costs to obtain a contract | Expensed | Capitalised if recoverable and incremental | Same as Ind AS |
| Disclosure volume | Limited | Extensive (Para 110-129) | Same as Ind AS |
India has adopted IFRS 15 almost word-for-word as Ind AS 115. However, certain clarifications from ICAI’s educational material apply locally. Indian companies must also comply with Schedule III presentation requirements alongside these recognition rules.
Latest Amendments to Ind AS 115 (FY 2026-27)
No amendments have been notified to Ind AS 115 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 116](/ind-as-116-leases/), Lease contracts scoped out; sale-and-leaseback assessment uses Ind AS 115 to test if a sale has occurred.
- [Ind AS 109](/ind-as-109-financial-instruments/), Receivables from customer contracts are within Ind AS 109 for impairment.
- [Ind AS 8](/ind-as-8-accounting-policies/), Changes in estimates relating to variable consideration.
- [AS 9](/as-9-revenue-recognition/), Equivalent revenue standard under the AS framework.
- [AS 7](/as-7-construction-contracts/), Equivalent construction-contract standard under the AS framework.
Need Help with Ind AS 115 Compliance?
Patron Accounting LLP supports listed and unlisted companies across India with end-to-end compliance for Ind AS 115 Revenue from Contracts with Customers. Our team combines technical expertise with practical experience gained from hundreds of statutory audits and advisory mandates involving complex contracts.
Our services include:
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Frequently Asked Questions (FAQs)
The five-step model under Ind AS 115 requires entities to: identify the contract; identify separate performance obligations; determine the transaction price; allocate that price based on relative stand-alone selling prices; and recognise revenue when each obligation is satisfied by transferring control.
Private limited companies must apply Ind AS 115 only if they meet net worth criteria prescribed by the Ministry of Corporate Affairs, currently Rs 250 crore or more, or if they are part of a group where another entity applies Ind AS. Voluntary adoption is permitted but not mandatory below thresholds.
Under Ind AS 115, variable consideration includes discounts, rebates or bonuses whose amount is uncertain. Entities estimate this using expected value or most likely amount but include it only if reversal is unlikely once uncertainty resolves (Para 56). This prevents premature recognition of uncertain amounts.
Principal vs agent assessment determines whether an entity controls goods or services before transfer. If so, it acts as principal and recognises gross revenue; otherwise it acts as agent and recognises only commission income. This distinction significantly affects reported turnover under Schedule III.
Unlike legacy standards which used transaction-based or percentage-of-completion models, Ind AS 115 applies a unified five-step approach based on performance obligations and transfer of control. It also introduces new concepts such as contract assets/liabilities and extensive disclosure requirements aligned with IFRS 15.
Real estate developers must now assess whether control transfers over time or at handover. Many projects that previously recognised revenue using percentage-of-completion now defer recognition until possession passes, resulting in later profit booking compared to prior ICAI Guidance Note practices.
The Ministry of Corporate Affairs made Ind AS 115 effective for accounting periods beginning on or after April 1, 2018 through notification dated March 28, 2018. All listed companies and qualifying unlisted companies have been required to follow it since then.
No amendments have been notified to Ind AS 115 for FY 2026-27 as of May 2, 2026. The standard remains unchanged; companies should continue following current guidance issued by ICAI and MCA notifications without modification for this reporting period.
Software subscription revenues are typically recognised over time since customers receive benefits continuously throughout the subscription period. However, term licences may be recognised at a point in time depending on whether control transfers upfront per criteria set out in Paras 31-38.
Companies must disclose disaggregated revenue categories; opening/closing balances for contract assets/liabilities; quantitative details about performance obligations; significant judgements made; costs capitalised relating to contracts; and reconciliation statements, all per Paras 110-129 of Ind AS 115 alongside Schedule III requirements.
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 (Indian Accounting Standards) Amendment Rules, 2018, dated 28 March 2018) · IFRS Foundation