Retention Money as per Ind as 109

IFRS 1710 views 2 replies

just for GAGS

11 Points Joined November 2017

How are retention moeny to be treates in Ind As?

There are long EC contracts where retention money is being deducted on successive payments (mostly upto 5% of the contract value) and released when conditions are met of the contract.

Ind as required us to give Time value treatment for financial assets. But aren't retention money a kind of money with held for reasons other than time value? It is basically a deposit against protection of the term of contract. So is it required to discount retention money? Many top companies discount them. Kindly provide basis for the answer.

Regards,

Sairaj shetty

Replies (2)

Yasaswi Gomes new

Finance

4545 Points Joined September 2020

Since there is no significant financing component in it, it is treated as trade receivable until the home constructed and handed over. How ever receivables, contract assets and lease receivables are impairment tested and it is called something as simplified approach. For more info on this try indas financial instruments. I have no expertise in calculating expected credit losses

Yasaswi Gomes new

Finance

4545 Points Joined September 2020

Good to know this. But as far as i know discounting is only for cashflows. Eg 1000 receivable is discounted today at reporting date. Then how is it fair value? The coupon is never discounted in the amortisation table but adjusted against the market rate.

If a customer retained money its receivables at fairvalue. I could be wrong in instruments but will check out if pv=fairvalue