Depb doubt....urgent sir!!

This query is : Resolved

Rajesh (Querist)
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11 January 2012 Dear Experts,
The company in which i am put for the internal audit does export sales too.
They are eligible to get the export incentives as per the DGFT guidelines.

Suppose if they make export sales Rs.100000
They are eligible for DEPB for Rs.8000

They make an application to get that DEPB certificate amounting Rs.8000.

Then they sell it to the outsiders for 7000. Sometimes it may be even less than 7000 say 6000.

1)Please tell me is there any instituite guidelines as per AS-9 (revenue recognition) or any other pronouncement on how to account this eligible DEPB of Rs.8000. But the actual receipt is Rs.7000 or 6000.

Thanking you,
With regards,
Rajesh.
2)

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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12 January 2012 ACTUALLY VAT WILL BE APPLICABLE IN THIS MATTER.

Rajesh

Rajesh (Querist)
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12 January 2012 Ramesh Kumar Verma Sir...What have u replied...and why u chose it as resolved?
Its not actually resolved....

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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21 July 2024 Under Indian Accounting Standards (Ind AS) and generally accepted accounting principles, including AS-9 (Revenue Recognition), the treatment of export incentives like DEPB (Duty Entitlement Pass Book) would typically be as follows:

1. **Recognition of DEPB Incentive:**
- The DEPB incentive of Rs.8,000 is recognized at the fair value of the consideration received or receivable. This means that if the company receives Rs.7,000 or Rs.6,000 upon selling the DEPB certificate, that amount should be recognized as revenue.

2. **Initial Recognition:**
- When the company receives the DEPB certificate (entitlement) from the government or authorities, it should initially recognize it at the fair value of what it expects to receive upon sale. This could be based on market prices or historical sales data if available.

3. **Subsequent Measurement:**
- Subsequent to initial recognition, the DEPB is accounted for at its fair value, which is determined based on the consideration received or receivable upon its actual sale.

4. **Revenue Recognition:**
- The revenue from the DEPB certificate is recognized when the certificate is sold to a third party. The amount recognized as revenue will be the actual consideration received, which is Rs.7,000 or Rs.6,000 in your example.

5. **Accounting Treatment:**
- Initially, upon receipt of the DEPB certificate, it should be recorded at its fair value (Rs.7,000 or Rs.6,000).
- Upon sale of the DEPB certificate, the company should recognize revenue equal to the consideration received (Rs.7,000 or Rs.6,000).

### AS-9 and Revenue Recognition:
AS-9 provides guidance on revenue recognition principles, emphasizing that revenue should be recognized when it is earned and can be reliably measured. In the case of export incentives like DEPB, the key principle is to recognize revenue at the fair value of the consideration received or receivable.

### Conclusion:
The company should recognize the DEPB incentive initially at its fair value based on the expected consideration upon sale. Subsequently, upon actual sale of the DEPB certificate, revenue should be recognized based on the amount received. This approach ensures compliance with AS-9 and proper accounting for export incentives under Indian accounting standards. Always ensure to follow the specific guidelines and interpretations that apply to your particular situation and seek professional advice if needed.

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