REVENUE RECOGNITION AS PER IND AS 115

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Ind AS 115 dictates that revenue is recognised when control of goods transfers to the customer, often guided by Incoterms. For Ex-Works, revenue is recognised when goods are available at the seller's premises. With Door Delivery, revenue is recognised upon actual delivery. For C&I (interpreted as CIF), revenue is recognised when goods are loaded onto the vessel at the port of shipment, as control transfers then. Similarly, under C&F (CFR), revenue is recognised upon loading goods onto the vessel at the port of shipment, even though the seller arranges freight.

Chahat Khanna

Chahat Khanna (Querist)

02 November 2025 Ind AS 115 says revenue to be recognised on transfer of control, (risk and reward), so who carries risk and reward in following incoterms? Material dispatched
1. On exworks
2. Door delivery
3. C&I
4. C&F (Cost & freight by supplier, insurance by buyer)
How to recognise revenue in this cases?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

03 November 2025 Under Ind AS 115, revenue is recognized when control of goods or services transfers to the customer, which is generally guided by the terms of the contract—often specified through Incoterms. The transfer of "risk and reward" is important, but Ind AS 115 emphasizes "control" as the key criterion for revenue recognition. Below is an analysis of control, risk, and reward transfer for each.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

03 November 2025 Ex-Works (EXW)
Who bears risk/reward: The buyer assumes risk and reward as soon as the goods are made available at the seller’s premises (before loading on the vehicle).

Revenue recognition: Seller should recognize revenue when goods are made available at their premises, provided there are no additional performance obligations such as loading or transport.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

03 November 2025 Door Delivery
Who bears risk/reward: The seller bears risk and reward until goods are delivered to the buyer’s specified location (the door or place in buyer’s country).

Revenue recognition: Control, risk, and reward transfer at the point of actual delivery to the buyer’s address; revenue is recognized upon delivery.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

03 November 2025 C&I (Cost & Insurance)
Who bears risk/reward: C&I is not a standard Incoterm, but if taken to mean CIF (Cost, Insurance, and Freight), risk transfers to the buyer once goods are loaded onto the vessel at the port of shipment, even though the seller pays for insurance and transport up to the destination port.

Revenue recognition: Revenue is recognized when goods are loaded on the vessel at the port of shipment, as control is considered to have transferred at this point.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

03 November 2025 C&F (Cost & Freight, insurance by buyer) – (CFR)
Who bears risk/reward: Under CFR, risk and reward transfer to the buyer when goods are loaded on board the vessel, even though the seller pays the freight to the destination; insurance is not provided by the seller.

Revenue recognition: Control is transferred—and revenue is recognized—when goods are loaded onto the vessel at the port of shipment, unless the contract contains a clause to the contrary or there are additional obligations.

Thus Ind AS 115 requires careful evaluation of “transfer of control,” considering not just contractual Incoterms but also the substance of the transaction and any remaining obligations.

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