Refer Appendix 1
B58 The nature of an entity’s promise in granting a licence is a promise to
provide a right to access the entity’s intellectual property if all of the following criteria are met:
(a) the contract requires, or the customer reasonably expects, that the entity will undertake activities that
significantly affect the intellectual property to which the customer has rights (see paragraph B59 and B59A );
(b) the rights granted by the licence directly expose the customer to any positive or negative effects of the
entity’s activities identified in paragraph B58(a); and
(c) those activities do not result in the transfer of a good or a service to the customer as those activities
occur (see paragraph 25).
B59 Factors that may indicate that a customer could reasonably expect that an entity
will undertake activities that significantly affect the intellectual property include the entity’s customary
business practices, published policies or specific statements. Although not determinative, the existence of a shared
economic interest (for example, a sales-based royalty) between the entity and the customer related to the
intellectual property to which the customer has rights may also indicate that the customer could reasonably expect
that the entity will undertake such activities.
B59A An entity’s activities significantly affect the intellectual property
to which the customer has rights when either:
(a) those activities are expected to significantly change the form (for example, the design or content) or the
functionality (for example, the ability to perform a function or task) of the intellectual property; or
(b) the ability of the customer to obtain benefit from the intellectual property is substantially derived from,
or dependent upon, those activities. For example, the benefit from a brand is often derived from, or dependent
upon, the entity’s ongoing activities that support or maintain the value of the intellectual property.
Accordingly, if the intellectual property to which the customer has rights has significant stand-alone functionality,
a substantial portion of the benefit of that intellectual property is derived from that functionality. Consequently,
the ability of the customer to obtain benefit from that intellectual property would not be significantly affected by
the entity’s activities unless those activities significantly change its form or functionality. Types of
intellectual property that often have significant stand-alone functionality include software, biological compounds
or drug formulas, and completed media content (for example, films, television shows and music recordings).
B60 If the criteria in paragraph B58 are met, an entity shall account for the
promise to grant a licence as a performance obligation satisfied over time because the customer will simultaneously
receive and consume the benefit from the entity’s performance of providing access to its intellectual property
as the performance occurs (see paragraph 35(a) ). An entity shall apply
paragraphs 39 – 45 to
select an appropriate method to measure its progress towards complete satisfaction of that performance obligation to
provide access.
B61 If the criteria in paragraph B58
are not met, the nature of an entity’s promise is to provide a right to use the entity’s intellectual
property as that intellectual property exists (in terms of form and functionality) at the point in time at which the
licence is granted to the customer. This means that the customer can direct the use of, and obtain substantially all
of the remaining benefits from, the licence at the point in time at which the licence transfers. An entity shall
account for the promise to provide a right to use the entity’s intellectual property as a performance
obligation satisfied at a point in time. An entity shall apply paragraph
38 to determine the point in time at which the licence transfers to the customer. However, revenue cannot be
recognised for a licence that provides a right to use the entity’s intellectual property before the beginning
of the period during which the customer is able to use and benefit from the licence. For example, if a software
licence period begins before an entity provides (or otherwise makes available) to the customer a code that enables
the customer to immediately use the software, the entity would not recognise revenue before that code has been
provided (or otherwise made available).
B62 An entity shall disregard the following factors when determining whether a
licence provides a right to access the entity’s intellectual property or a right to use the entity’s
intellectual property:
(a) Restrictions of time, geographical region or use—those restrictions define the attributes of the
promised licence, rather than define whether the entity satisfies its performance obligation at a point in time
or over time.
(b) Guarantees provided by the entity that it has a valid patent to intellectual property and that it will
defend that patent from unauthorised use—a promise to defend a patent right is not a performance
obligation because the act of defending a patent protects the value of the entity’s intellectual property
assets and provides assurance to the customer that the licence transferred meets the specifications of the
licence promised in the contract.
Sales-based or usage-based royalties
B63 Notwithstanding the requirements in paragraphs 56 – 59 , an entity shall
recognise revenue for a sales-based or usage-based royalty promised in exchange for a licence of intellectual
property only when (or as) the later of the following events occurs:
(a) the subsequent sale or usage occurs; and
(b) the performance obligation to which some or all of the sales- based or usage-based royalty has been
allocated has been satisfied (or partially satisfied).
B63A The requirement for a sales-based or usage-based royalty in paragraph B63
applies when the royalty relates only to a licence of intellectual property or when a licence of intellectual
property is the predominant item to which the royalty relates (for example, the licence of intellectual property may
be the predominant item to which the royalty relates when the entity has a reasonable expectation that the customer
would ascribe significantly more value to the licence than to the other goods or services to which the royalty
relates).
B63B When the requirement in paragraph B63A is met, revenue from a sales-based or
usage-based royalty shall be recognised wholly in accordance with paragraph B63. When the requirement in paragraph
B63A is not met, the requirements on variable consideration in paragraphs
50 – 59 apply to the sales-based or usage-based royalty.
Repurchase agreements
B64 A repurchase agreement is a contract in which an entity sells an asset and also
promises or has the option (either in the same contract or in another contract) to repurchase the asset. The
repurchased asset may be the asset that was originally sold to the customer, an asset that is substantially the same
as that asset, or another asset of which the asset that was originally sold is a component.
B65 Repurchase agreements generally come in three forms:
(a) an entity’s obligation to repurchase the asset (a forward);
(b) an entity’s right to repurchase the asset (a call option); and
(c) an entity’s obligation to repurchase the asset at the customer’s request (a put option).
A forward or a call option
B66 If an entity has an obligation or a right to repurchase the asset (a forward or
a call option), a customer does not obtain control of the asset because the customer is limited in its ability to
direct the use of, and obtain substantially all of the remaining benefits from, the asset even though the customer
may have physical possession of the asset. Consequently, the entity shall account for the contract as either of the
following:
(a) 4 a lease in accordance with Ind AS 116, Leases ,
if the entity can or must repurchase the asset for an amount that is less than the original selling price of the
asset, unless the contract is part of a sale and leaseback transaction. If the contract is part of a sale and
leaseback transaction, the entity shall continue to recognise the asset and shall recognise a financial
liability for any consideration received from the customer. The entity shall account for the financial liability
in accordance with Ind AS 109; or
(b) a financing arrangement in accordance with paragraph B68 if the entity can or must repurchase the asset for
an amount that is equal to or more than the original selling price of the asset.
B67 When comparing the repurchase price with the selling price, an entity shall
consider the time value of money.
B68 If the repurchase agreement is a financing arrangement, the entity shall
continue to recognise the asset and also recognise a financial liability for any consideration received from the
customer. The entity shall recognise the difference between the amount of consideration received from the customer
and the amount of consideration to be paid to the customer as interest and, if applicable, as processing or holding
costs (for example, insurance).
B69 If the option lapses unexercised, an entity shall derecognise the liability and
recognise revenue.
A put option
B70 5 If an entity has an obligation to repurchase the asset at the
customer’s request (a put option) at a price that is lower than the original selling price of the asset, the
entity shall consider at contract inception whether the customer has a significant economic incentive to exercise
that right. The customer’s exercising of that right results in the customer effectively paying the entity
consideration for the right to use a specified asset for a period of time. Therefore, if the customer has a
significant economic incentive to exercise that right, the entity shall account for the agreement as a lease in
accordance with Ind AS 116, unless the contract is part of a sale and leaseback transaction. If the contract is part
of a sale and leaseback transaction, the entity shall continue to recognise the asset and shall recognise a
financial liability for any consideration received from the customer. The entity shall account for the financial
liability in accordance with Ind AS 109.
B71 To determine whether a customer has a significant economic incentive to exercise
its right, an entity shall consider various factors, including the relationship of the repurchase price to the
expected market value of the asset at the date of the repurchase and the amount of time until the right expires. For
example, if the repurchase price is expected to significantly exceed the market value of the asset, this may
indicate that the customer has a significant economic incentive to exercise the put option.
B72 If the customer does not have a significant economic incentive to exercise its
right at a price that is lower than the original selling price of the asset, the entity shall account for the
agreement as if it were the sale of a product with a right of return as described in paragraphs B20 – B27 .
B73 If the repurchase price of the asset is equal to or greater than the original
selling price and is more than the expected market value of the asset, the contract is in effect a financing
arrangement and, therefore, shall be accounted for as described in paragraph B68.
B74 If the repurchase price of the asset is equal to or greater than the original
selling price and is less than or equal to the expected market value of the asset, and the customer does not have a
significant economic incentive to exercise its right, then the entity shall account for the agreement as if it were
the sale of a product with a right of return as described in paragraphs B20–B27.
B75 When comparing the repurchase price with the selling price, an entity shall
B76 If the option lapses unexercised, an entity shall derecognise the liability and
Consignment arrangements
B77 When an entity delivers a product to another party (such as a dealer or a
distributor) for sale to end customers, the entity shall evaluate whether that other party has obtained control of
the product at that point in time. A product that has been delivered to another party may be held in a consignment
arrangement if that other party has not obtained control of the product. Accordingly, an entity shall not recognise
revenue upon delivery of a product to another party if the delivered product is held on consignment.
B78 Indicators that an arrangement is a consignment arrangement include, but are not
limited to, the following:
(a) the product is controlled by the entity until a specified event occurs, such as the sale of the product to a
customer of the dealer or until a specified period expires;
(b) the entity is able to require the return of the product or transfer the product to a third party (such as
another dealer); and
(c) the dealer does not have an unconditional obligation to pay for the product (although it might be required
to pay a deposit).
Bill-and-hold arrangements
B79 A bill-and-hold arrangement is a contract under which an entity bills a customer
for a product but the entity retains physical possession of the product until it is transferred to the customer at a
point in time in the future. For example, a customer may request an entity to enter into such a contract because of
the customer’s lack of available space for the product or because of delays in the customer’s production
schedules.
B80 An entity shall determine when it has satisfied its performance obligation to
transfer a product by evaluating when a customer obtains control of that product (see paragraph 38 ). For some contracts, control is transferred either when the product is
delivered to the customer’s site or when the product is shipped, depending on the terms of the contract
(including delivery and shipping terms). However, for some contracts, a customer may obtain control of a product
even though that product remains in an entity’s physical possession. In that case, the customer has the
ability to direct the use of, and obtain substantially all of the remaining benefits from, the product even though
it has decided not to exercise its right to take physical possession of that product. Consequently, the entity does
not control the product. Instead, the entity provides custodial services to the customer over the customer’s
asset.
B81 In addition to applying the requirements in paragraph 38, for a customer to have
obtained control of a product in a bill-and-hold arrangement, all of the following criteria must be met:
(a) the reason for the bill-and-hold arrangement must be substantive (for example, the customer has requested
the arrangement);
(b) the product must be identified separately as belonging to the customer;
(c) the product currently must be ready for physical transfer to the customer; and
(d) the entity cannot have the ability to use the product or to direct it to another customer.
B82 If an entity recognises revenue for the sale of a product on a bill- and-hold
basis, the entity shall consider whether it has remaining performance obligations (for example, for custodial
services) in accordance with paragraphs 22–30 to which the entity shall allocate a portion of the transaction
price in accordance with paragraphs 73 – 86 .
Customer acceptance
B83 In accordance with paragraph
38(e) , a customer’s acceptance of an asset may indicate that the customer has obtained control of the
asset. Customer acceptance clauses allow a customer to cancel a contract or require an entity to take remedial
action if a good or service does not meet agreed-upon specifications. An entity shall consider such clauses when
evaluating when a customer obtains control of a good or service.
B84 If an entity can objectively determine that control of a good or service has
been transferred to the customer in accordance with the agreed-upon specifications in the contract, then customer
acceptance is a formality that would not affect the entity’s determination of when the customer has obtained
control of the good or service. For example, if the customer acceptance clause is based on meeting specified size
and weight characteristics, an entity would be able to determine whether those criteria have been met before
receiving confirmation of the customer’s acceptance. The entity’s experience with contracts for similar
goods or services may provide evidence that a good or service provided to the customer is in accordance with the
agreed-upon specifications in the contract. If revenue is recognised before customer acceptance, the entity still
must consider whether there are any remaining performance obligations (for example, installation of equipment) and
evaluate whether to account for them separately.
B85 However, if an entity cannot objectively determine that the good or service
provided to the customer is in accordance with the agreed- upon specifications in the contract, then the entity
would not be able to conclude that the customer has obtained control until the entity receives the customer’s
acceptance. That is because in that circumstance the entity cannot determine that the customer has the ability to
direct the use of, and obtain substantially all of the remaining benefits from, the good or service.
B86 If an entity delivers products to a customer for trial or evaluation purposes
and the customer is not committed to pay any consideration until the trial period lapses, control of the product is
not transferred to the customer until either the customer accepts the product or the trial period lapses.
Disclosure of disaggregated revenue
B87 Paragraph 114 requires an entity
to disaggregate revenue from contracts with customers into categories that depict how the nature, amount, timing and
uncertainty of revenue and cash flows are affected by economic factors. Consequently, the extent to which an
entity’s revenue is disaggregated for the purposes of this disclosure depends on the facts and circumstances
that pertain to the entity’s contracts with customers. Some entities may need to use more than one type of
category to meet the objective in paragraph 114 for disaggregating revenue. Other entities may meet the objective by
using only one type of category to disaggregate revenue.
B88 When selecting the type of category (or categories) to use to disaggregate
revenue, an entity shall consider how information about the entity’s revenue has been presented for other
purposes, including all of the following:
(a) disclosures presented outside the financial statements (for example, in earnings releases, annual reports or
investor presentations);
(b) information regularly reviewed by the chief operating decision maker for evaluating the financial
performance of operating segments; and
(c) other information that is similar to the types of information identified in paragraph B88(a) and (b) and
that is used by the entity or users of the entity’s financial statements to evaluate the entity’s
financial performance or make resource allocation decisions.
B89 Examples of categories that might be appropriate include, but are not limited
to, all of the following:
(a) type of good or service (for example, major product lines);
(b) geographical region (for example, country or region);
(c) market or type of customer (for example, government and non-government customers);
(d) type of contract (for example, fixed-price and time-and- materials contracts);
(e) contract duration (for example, short-term and long-term contracts);
(f) timing of transfer of goods or services (for example, revenue from goods or services transferred to
customers at a point in time and revenue from goods or services transferred over time); and
(g) sales channels (for example, goods sold directly to consumers and goods sold through intermediaries).
Appendix C
Effective date and transition
C1 An entity shall apply this Standard for accounting periods beginning on or after 1 April, 2018.
C1A 6 Ind AS 116, Leases , amended paragraphs 5, 97, B66, B70, paragraph AG8 of Appendix D and
paragraph 5 of Appendix E. An entity shall apply those amendments when it applies Ind AS 116.
C1B *
C1C 7 Ind AS 117 amended paragraph 5. An entity shall apply that amendment when it applies Ind AS 117.
Transition
C2 For the purposes of the transition requirements in paragraphs C3– C8A:
(a) the date of initial application is the start of the reporting period in which an entity first applies this
Standard; and
(b) a completed contract is a contract for which the entity has transferred all of the goods or services
identified in accordance with Ind AS 11, Construction Contracts and Ind AS 18, Revenue .
C3 An entity shall apply this Standard using one of the following two methods:
(a) retrospectively to each prior reporting period presented in accordance with Ind AS 8, Accounting
Policies, Changes in Accounting Estimates and Errors , subject to the expedients in paragraph C5; or
(b) retrospectively with the cumulative effect of initially applying this Standard recognised at the date of
initial application in accordance with paragraphs C7–C8.
C4 Notwithstanding the requirements of paragraph 28 of Ind AS 8, when this Standard is first applied, an entity need
only present the quantitative information required by paragraph 28(f) of Ind AS 8 for the accounting period
immediately preceding the first annual period for which this Standard is applied (the ‘immediately preceding
period’) and only if the entity applies this Standard retrospectively in accordance with paragraph C3(a). An
entity may also present this information for the current period or for earlier comparative periods, but is not
required to do so.
C5 An entity may use one or more of the following practical expedients when applying this Standard retrospectively in
accordance with paragraph C3(a):
(a) for completed contracts, an entity need not restate contracts that:
(i) begin and end within the same accounting period; or
(ii) are completed contracts at the beginning of the earliest period presented.
(b) for completed contracts that have variable consideration, an entity may use the transaction price at the
date the contract was completed rather than estimating variable consideration amounts in the comparative
reporting periods.
(c) for contracts that were modified before the beginning of the earliest period presented, an entity need not
retrospectively restate the contract for those contract modifications in accordance with paragraphs 20–21.
Instead, an entity shall reflect the aggregate effect of all of the modifications that occur before the
beginning of the earliest period presented when:
(i) identifying the satisfied and unsatisfied performance obligations;
(ii) determining the transaction price; and
(iii) allocating the transaction price to the satisfied and unsatisfied performance obligations.
(d) for all reporting periods presented before the date of initial application, an entity need not disclose the
amount of the transaction price allocated to the remaining performance obligations and an explanation of when
the entity expects to recognise that amount as revenue (see paragraph 120).
C6 For any of the practical expedients in paragraph C5 that an entity uses, the entity shall apply that expedient
consistently to all contracts within all reporting periods presented. In addition, the entity shall disclose all of
the following information:
(a) the expedients that have been used; and
(b) to the extent reasonably possible, a qualitative assessment of the estimated effect of applying each of
those expedients.
C7 If an entity elects to apply this Standard retrospectively in accordance with paragraph C3(b), the entity shall
recognise the cumulative effect of initially applying this Standard as an adjustment to the opening balance of
retained earnings (or other component of equity, as appropriate) of the accounting period that includes the date of
initial application. Under this transition method, an entity may elect to apply this Standard retrospectively only
to contracts that are not completed contracts at the date of initial application (for example, 1 April, 2018 for an
entity with a 31 March year-end).
C7A An entity applying this Standard retrospectively in accordance with paragraph C3(b) may also use the practical
expedient described in paragraph C5(c), either:
(a) for all contract modifications that occur before the beginning of the earliest period presented; or
(b) for all contract modifications that occur before the date of initial application.
If an entity uses this practical expedient, the entity shall apply the expedient consistently to all contracts and
disclose the information required by paragraph C6.
C8 For reporting periods that include the date of initial application, an entity shall provide both of the following
additional disclosures if this Standard is applied retrospectively in accordance with paragraph C3(b):
(a) the amount by which each financial statement line item is affected in the current reporting period by the
application of this Standard as compared to Ind AS 11 and Ind AS 18; and
(b) an explanation of the reasons for significant changes identified in C8(a).
C8A *
C9 *
Withdrawal of other Standards
C10 This Standard supersedes the following Standards:
(a) Ind AS 11, Construction Contracts ;
(b) Ind AS 18, Revenue
Appendix D
Service Concession Arrangements
This appendix is an integral part of the Standard.
Background
1 Infrastructure for public services—such as roads, bridges, tunnels, prisons, hospitals, airports, water
distribution facilities, energy supply and telecommunication networks—has traditionally been constructed,
operated and maintained by the public sector and financed through public budget appropriation.
2 In recent times, governments have introduced contractual service arrangements to attract private sector
participation in the development, financing, operation and maintenance of such infrastructure. The infrastructure
may already exist, or may be constructed during the period of the service arrangement. An arrangement within the
scope of this Appendix typically involves a private sector entity (an operator) constructing the infrastructure used
to provide the public service or upgrading it (for example, by increasing its capacity) and operating and
maintaining that infrastructure for a specified period of time. The operator is paid for its services over the
period of the arrangement. The arrangement is governed by a contract that sets out performance standards, mechanisms
for adjusting prices, and arrangements for arbitrating disputes. Such an arrangement is often described as a
‘build- operate-transfer’, a ‘rehabilitate-operate-transfer’ or a ‘public-to-
private’ service concession arrangement.
3 A feature of these service arrangements is the public service nature of the obligation undertaken by the operator.
Public policy is for the services related to the infrastructure to be provided to the public, irrespective of the
identity of the party that operates the services. The service arrangement contractually obliges the operator to
provide the services to the public on behalf of the public sector entity. Other common features are:
(a) the party that grants the service arrangement (the grantor) is a public sector entity, including a
governmental body, or a private sector entity to which the responsibility for the service has been devolved.
(b) the operator is responsible for at least some of the management of the infrastructure and related services
and does not merely act as an agent on behalf of the grantor.
(c) the contract sets the initial prices to be levied by the operator and regulates price revisions over the
period of the service arrangement.
(d) the operator is obliged to hand over the infrastructure to the grantor in a specified condition at the end
of the period of the arrangement, for little or no incremental consideration, irrespective of which party
initially financed it.
Scope
4 This Appendix gives guidance on the accounting by operators for public-to-private service concession arrangements.
5 This Appendix applies to public-to-private service concession arrangements if:
(a) the grantor controls or regulates what services the operator must provide with the infrastructure, to whom
it must provide them, and at what price; and
(b) the grantor controls—through ownership, beneficial entitlement or otherwise—any significant
residual interest in the infrastructure at the end of the term of the arrangement.
6 Infrastructure used in a public-to-private service concession arrangement for its entire useful life (whole of life
assets) is within the scope of this Appendix if the conditions in paragraph 5(a) of this Appendix are met.
Paragraphs AG1–AG8 of the Application Guidance of this Appendix provide guidance on determining whether, and
to what extent, public-to-private service concession arrangements are within the scope of this Appendix.
7 This Appendix applies to both:
(a) infrastructure that the operator constructs or acquires from a third party for the purpose of the service
arrangement; and
(b) existing infrastructure to which the grantor gives the operator access for the purpose of the service
arrangement.
8 This Appendix does not specify the accounting for infrastructure that was held and recognised as property, plant
and equipment by the operator before entering the service arrangement. The derecognition requirements of Ind ASs (as
set out in Ind AS 16) apply to such infrastructure.
9 This Appendix does not specify the accounting by grantors.
Issues
10 This Appendix sets out general principles on recognising and measuring the obligations and related rights in
service concession arrangements. Requirements for disclosing information about service concession arrangements are
in Appendix E to this Indian Accounting Standard. The issues addressed in this Appendix are:
(a) treatment of the operator’s rights over the infrastructure;
(b) recognition and measurement of arrangement consideration;
(c) construction or upgrade services;
(d) operation services;
(e) borrowing costs;
(f) subsequent accounting treatment of a financial asset and an intangible asset; and
(g) items provided to the operator by the grantor.
Accounting Principles
Treatment of the operator’s rights over the infrastructure
11 Infrastructure within the scope of this Appendix shall not be recognised as property, plant and equipment of the
operator because the contractual service arrangement does not convey the right to control the use of the public
service infrastructure to the operator. The operator has access to operate the infrastructure to provide the public
service on behalf of the grantor in accordance with the terms specified in the contract.
Recognition and measurement of arrangement consideration
12 Under the terms of contractual arrangements within the scope of this Appendix, the operator acts as a service
provider. The operator constructs or upgrades infrastructure (construction or upgrade services) used to provide a
public service and operates and maintains that infrastructure (operation services) for a specified period of time.
13 The operator shall recognise and measure revenue in accordance with Ind AS 115 for the services it performs. The
nature of the consideration determines its subsequent accounting treatment. The subsequent accounting for
consideration received as a financial asset and as an intangible asset is detailed in paragraphs 23–26 of this
Appendix.
Construction or upgrade services
14 The operator shall account for construction or upgrade services in accordance with Ind AS 115.
Consideration given by the grantor to the operator
15 If the operator provides construction or upgrade services the consideration received or receivable by the operator
shall be recognised in accordance with Ind AS 115. The consideration may be rights to:
(a) a financial asset, or
(b)an intangible asset.
16 The operator shall recognise a financial asset to the extent that it has an unconditional contractual right to
receive cash or another financial asset from or at the direction of the grantor for the construction services; the
grantor has little, if any, discretion to avoid payment, usually because the agreement is enforceable by law. The
operator has an unconditional right to receive cash if the grantor contractually guarantees to pay the operator (a)
specified or determinable amounts or (b) the shortfall, if any, between amounts received from users of the public
service and specified or determinable amounts, even if payment is contingent on the operator ensuring that the
infrastructure meets specified quality or efficiency requirements.
17 The operator shall recognise an intangible asset to the extent that it receives a right (a licence) to charge
users of the public service. A right to charge users of the public service is not an unconditional right to receive
cash because the amounts are contingent on the extent that the public uses the service.
18 If the operator is paid for the construction services partly by a financial asset and partly by an intangible
asset it is necessary to account separately for each component of the operator’s consideration. The
consideration received or receivable for both components shall be recognised initially in accordance with Ind AS
115.
19 The nature of the consideration given by the grantor to the operator shall be determined by reference to the
contract terms and, when it exists, relevant contract law. The nature of the consideration determines the subsequent
accounting as described in paragraphs 23–26 of this Appendix. However, both types of consideration are
classified as a contract asset during the construction or
upgrade period in accordance with Ind AS 115.
Operation services
20 The operator shall account for operation services in accordance with Ind AS 115.
Contractual obligations to restore the infrastructure to a specified level of serviceability
21 The operator may have contractual obligations it must fulfil as a condition of its licence (a) to maintain the
infrastructure to a specified level of serviceability or (b) to restore the infrastructure to a specified condition
before it is handed over to the grantor at the end of the service arrangement. These contractual obligations to
maintain or restore infrastructure, except for any upgrade element (see paragraph 14 of this Appendix), shall be
recognised and measured in accordance with Ind AS 37, ie at the best estimate of the expenditure that would be
required to settle the present obligation at the end of the reporting period.
Borrowing costs incurred by the operator
22 In accordance with Ind AS 23, borrowing costs attributable to the arrangement shall be recognised as an expense in
the period in which they are incurred unless the operator has a contractual right to receive an intangible asset (a
right to charge users of the public service). In this case borrowing costs attributable to the arrangement shall be
capitalised during the construction phase of the arrangement in accordance with that Standard.
Financial asset
23 Ind ASs 32,107 and 109 apply to the financial asset recognised under paragraphs 16 and 18 of this Appendix.
24 The amount due from or at the direction of the grantor is accounted for in accordance with Ind AS 109 as measured
at:
(a) amortised cost;
(b) fair value through other comprehensive income; or
(c) fair value through profit or loss.
25 If the amount due from the grantor is measured at amortised cost or fair value through other comprehensive income,
Ind AS 109 requires interest calculated using the effective interest method to be recognised in profit or loss.
Intangible asset
26 Ind AS 38 applies to the intangible asset recognised in accordance with paragraphs 17 and 18 of this Appendix.
Paragraphs 45–47 of Ind AS 38 provide guidance on measuring intangible assets acquired in exchange for a
non-monetary asset or assets or a combination of monetary and non-monetary assets.
Items provided to the operator by the grantor
27 In accordance with paragraph 11 of this Appendix, infrastructure items to which the operator is given access by
the grantor for the purposes of the service arrangement are not recognised as property, plant and equipment of the
operator. The grantor may also provide other items to the operator that the operator can keep or deal with as it
wishes. If such assets form part of the consideration payable by the grantor for the services, they are not
government grants as defined in Ind AS 20. Instead, they are accounted for as part of the transaction price as
defined in Ind AS 115.
8 Effective date
28[Refer Appendix 1]
28A-28C [Refer Appendix 1]
28D Ind AS 115 amended paragraphs 13–15, 18–20 and 27 of Appendix D (which was earlier notified as
Appendix A of erstwhile Ind AS 11). An entity shall apply those amendments when it applies Ind AS 115.
28E [Refer Appendix 1]
28F Ind AS 116, amended paragraph AG8. An entity shall apply that amendment when it applies Ind AS 116.
Application Guidance on Appendix D
This Application Guidance is an integral part of Appendix D
Scope (paragraph 5 of Appendix D)
AG1 Paragraph 5 of Appendix D specifies that infrastructure is within the scope of the Appendix when the following
conditions apply:
AG2 The control or regulation referred to in condition (a) could be by contract or otherwise (such as through a
regulator), and includes circumstances in which the grantor buys all of the output as well as those in which some or
all of the output is bought by other users. In applying this condition, the grantor and any related parties shall be
considered together. If the grantor is a public sector entity, the public sector as a whole, together with any
regulators acting in the public interest, shall be regarded as related to the grantor for the purposes of this
Appendix D.
AG3 For the purpose of condition (a), the grantor does not need to have complete control of the price: it is
sufficient for the price to be regulated by the grantor, contract or regulator, for example by a capping mechanism.
However, the condition shall be applied to the substance of the agreement. Non-substantive features, such as a cap
that will apply only in remote circumstances, shall be ignored. Conversely, if for example, a contract purports to
give the operator freedom to set prices, but any excess profit is returned to the grantor, the operator’s
return is capped and the price element of the control test is met.
AG4 For the purpose of condition (b), the grantor’s control over any significant residual interest should both
restrict the operator’s practical ability to sell or pledge the infrastructure and give the grantor a
continuing right of use throughout the period of the arrangement. The residual interest in the infrastructure is the
estimated current value of the infrastructure as if it were already of the age and in the condition expected at the
end of the period of the arrangement.
AG5 Control should be distinguished from management. If the grantor retains both the degree of control described in
paragraph 5(a) of Appendix D and any significant residual interest in the infrastructure, the operator is only
managing the infrastructure on the grantor’s behalf—even though, in many cases, it may have wide
managerial discretion.
AG6 Conditions (a) and (b) together identify when the infrastructure, including any replacements required (see
paragraph 21 of Appendix D), is controlled by the grantor for the whole of its economic life. For example, if the
operator has to replace part of an item of infrastructure during the period of the arrangement (eg the top layer of
a road or the roof of a building), the item of infrastructure shall be considered as a whole. Thus condition (b) is
met for the whole of the infrastructure, including the part that is replaced, if the grantor controls any
significant residual interest in the final replacement of that part.
AG7 Sometimes the use of infrastructure is partly regulated in the manner described in paragraph 5(a) of Appendix D
and partly unregulated. However, these arrangements take a variety of forms:
(a) any infrastructure that is physically separable and capable of being operated independently and meets the
definition of a cash-generating unit as defined in Ind AS 36 shall be analysed separately if it is used wholly
for unregulated purposes. For example, this might apply to a private wing of a hospital, where the remainder of
the hospital is used by the grantor to treat public patients.
(b) when purely ancillary activities (such as a hospital shop) are unregulated, the control tests shall be
applied as if those services did not exist, because in cases in which the grantor controls the services in the
manner described in paragraph 5 of Appendix D, the existence of ancillary activities does not detract from the
grantor’s control of the infrastructure.
AG8 9 The operator may have a right to use the separable infrastructure described in paragraph AG7(a), or
the facilities used to provide ancillary unregulated services described in paragraph AG7(b). In either case, there
may in substance be a lease from the grantor to the operator; if so, it shall be accounted for in accordance with
Ind AS 116.
Information note 1
Accounting framework for public-to-private service arrangements
This note accompanies, but is not part of, Appendix D
The diagram below summarises the accounting for service arrangements established by Appendix
A
Information note 2
References to Indian Accounting Standards that apply to typical types of public-to-private arrangements
This note accompanies, but is not part of, Appendix D.
The table sets out the typical types of arrangements for private sector participation in the provision of public
sector services and provides references to Indian Accounting Standards that apply to those arrangements. The list of
arrangements types is not exhaustive. The purpose of the table is to highlight the continuum of arrangements. It is
not Appendix D’s intention to convey the impression that bright lines exist between the accounting
requirements for public-to-private arrangements
Category
Lessee
Service provider
Owner
Typical arrangement types
Lease (eg Operat or leases asset from grantor
Service and/or maintenanc e contract (specific tasks eg debt collection)
Rehabilitate - operate - transfer
Build-operate - transfer
Build - own - operate
100% Divestment / Privatisation / Corporation
Asset ownership
Grantor
Operator
Capital investment
Demand risk
Shared
Operator and/or Grantor
Typical duration
8-20 years
1-5 years
25-30 years
Indefinite (or may be limited by licence)
Residual interest
10 Relevant Indian Accounting Standards
Ind AS 116
Ind AS 115
This Appendix D
Ind AS 16
Appendix E
Service Concession Arrangements: Disclosures
This Appendix is an integral part of the Standard.
Issue
1 An entity (the operator) may enter into an arrangement with another entity (the grantor) to provide services that
give the public access to major economic and social facilities. The grantor may be a public or private sector
entity, including a governmental body. Examples of service concession arrangements involve water treatment and
supply facilities, motorways, car parks, tunnels, bridges, airports and telecommunication networks. Examples of
arrangements that are not service concession arrangements include an entity outsourcing the operation of its
internal services (eg employee cafeteria, building maintenance, and accounting or information technology functions).
2 A service concession arrangement generally involves the grantor conveying for the period of the concession to the
operator:
(a) the right to provide services that give the public access to major economic and social facilities, and
(b) in some cases, the right to use specified tangible assets, intangible assets, or financial assets,
in exchange for the operator:
(c) committing to provide the services according to certain terms and conditions during the concession period,
and
(d) when applicable, committing to return at the end of the concession period the rights received at the
beginning of the concession period and/or acquired during the concession period.
3 The common characteristic of all service concession arrangements is that the operator both receives a right and
incurs an obligation to provide public services.
4 The issue is what information should be disclosed in the notes in the financial statements of an operator and a
grantor.
5 11 Certain aspects and disclosures relating to some service concession arrangements are addressed by
Indian Accounting Standards (eg Ind AS 16 applies to acquisitions of items of property, plant and equipment, Ind AS
116 applies to leases of assets, and Ind AS 38 applies to acquisitions of intangible assets). However, a service
concession arrangement may involve executory contracts that are not addressed in Indian Accounting Standards, unless
the contracts are onerous, in which case Ind AS 37 applies. Therefore, this Appendix addresses additional
disclosures of service concession arrangements.
6 All aspects of a service concession arrangement shall be considered in determining the appropriate disclosures in
the notes. An operator and a grantor shall disclose the following in each period:
(a) a description of the arrangement;
(b) significant terms of the arrangement that may affect the amount, timing and certainty of future cash flows
(eg the period of the concession, re-pricing dates and the basis upon which re-pricing or re-negotiation is
determined);
(c) the nature and extent (eg quantity, time period or amount as appropriate) of:
(i) rights to use specified assets;
(ii) obligations to provide or rights to expect provision of services;
(iii) obligations to acquire or build items of property, plant and equipment;
(iv) obligations to deliver or rights to receive specified assets at the end of the concession period;
(v) renewal and termination options; and
(vi) other rights and obligations (eg major overhauls);
(d) changes in the arrangement occurring during the period; and
(e) how the service arrangement has been classified.
6A An operator shall disclose the amount of revenue and profits or losses recognized in the period on exchanging
construction services for a financial asset or an intangible asset.
7 The disclosures required in accordance with paragraph 6 of this Appendix shall be provided
individually for each service concession arrangement or in aggregate for each class of service concession
arrangements. A class is a grouping of service concession arrangements involving services of a similar nature
(eg toll collections, telecommunications and water treatment services).
Appendix F
References to matters contained in other Indian Accounting Standards
This appendix is an integral part of the Ind AS.
This appendix lists the appendices which are part of other Indian Accounting Standards and make reference to Ind AS
115, Revenue from Contracts with Customers.
1 12 Omitted
2 Appendix A, Intangible Assets—Web Site Costs contained in Ind AS 38, Intangible Assets .
Appendix 1
Note: This appendix is not a part of the Indian Accounting Standard. The purpose of this appendix is only
to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 115 and the corresponding
International Financial Reporting Standard (IFRS) 15, Revenue from Contracts with Customers, IFRIC 12, Service
Concession Arrangements and SIC 29 Service Concession Arrangements: Disclosures, issued by the International
Accounting Standards Board.
Comparison with IFRS 15, Revenue from Contracts with Customers, IFRIC 12 and SIC 29
1 Different terminology is used in Ind AS 115 eg the term ‘ balance sheet’ is used instead of
‘statement of financial position’ and ‘statement of profit and loss’ is used instead of
‘statement of comprehensive income’.
2 13 As per paragraph 51 of IFRS 15, an amount of consideration, among other things, can vary because of
penalties. However, paragraph 51 of Ind AS 115 has been amended to exclude ‘penalties’ from the list of
examples given in the paragraph 51 due to which an amount of consideration can vary. However, paragraph 51AA has
been inserted to explain the accounting treatment of ‘penalties’.
3 Paragraph 109AA has been inserted to require an entity to present separately the amount of excise duty included in
the revenue recognised in the statement of profit and loss.
4 Paragraph 126AA has been inserted to present reconciliation of the amount of revenue recognised in the statement of
profit and loss with the contracted price showing separately each of the adjustments made to the contract price
specifying the nature and amount of each such adjustment separately.
5 14 In Appendix B – Application Guidance, paragraph B20AA has been inserted to explain the
accounting treatment in case of transfers of control of a product to a customer with an unconditional right of
return.
6 15 Paragraphs C1B, C8A and C9 of Appendix C and paragraphs 28 and 28E of Appendix D related to effective
date and transition have been deleted due to following reasons:
(a) Paragraphs C1B and C8A are not relevant in Indian context as the same refer to application of these
amendments in case where IFRS 15 was initially applied before issuance of amendments to the standard.
(b) Paragraph C9 refers to application of IAS 39, Financial Instruments , which is not relevant in Indian
context.
(c) Paragraphs 28 and 28E of Appendix D are not relevant in Indian context as the same relate to effective date
of IFRIC 12.
7 16 Paragraph B57 of Appendix B of IFRS 15 and paragraphs 28A-28C of IFRIC 12 appear as
‘Deleted’. However, in order to maintain consistency with paragraph numbers of IFRS 15 and IFRIC 12, the
paragraph numbers are retained in Ind AS 115.
Footnotes
# This Ind AS was notified vide G.S.R. 310(E) dated 28t h March, 2018 and was amended vide Notification No. G.S.R. 273(E) dated
30 th March, 2019, G.S.R. 419(E) dated 18 t h June, 2021, G.S.R. 242(E) dated 31 s t March, 2023, G.S.R. 492(E) dated 12th August, 2024 and G.S.R. 549(E) dated 13th August,
2025.
1 Substituted vide Notification No. G.S.R. 273(E) dated 30 th March, 2019.
2 Substituted vide Notification No. G.S.R. 492(E) dated 12th August, 2024.
3 Substituted vide Notification No. G.S.R. 273(E) dated 30 th March, 2019.
* Refer Appendix 1
4 Substituted vide Notification No. G.S.R. 273(E) dated 30 th March, 2019.
5 Substituted vide Notification No. G.S.R. 273(E) dated 30 th March, 2019.
6 Substituted vide Notification No. G.S.R. 273(E) dated 30 th March, 2019.
7 Inserted vide Notification No. G.S.R. 492(E) dated 12 th August, 2024.
8 Heading and paragraphs 28-28F inserted vide Notification No. G.S.R. 419(E) dated 18 th June, 2021.
9 Substituted vide Notification No. G.S.R. 273(E) dated 30 th March, 2019.
10 Editorial correction notified vide Notification No. G.S.R. 549(E) dated 13th August, 2025.
11 Substituted vide Notification No. G.S.R. 273(E) dated 30 th March, 2019.
12 Omitted vide Notification No. G.S.R. 273(E) dated 30 th March, 2019.
13 Editorial correction notified vide Notification No. G.S.R. 242(E) dated 31 st March, 2023.
14 Editorial correction notified vide Notification No. G.S.R. 242(E) dated 31 st March, 2023.
15 Substituted vide Notification No. G.S.R. 273(E) dated 30 th March, 2019 and G.S.R. 419(E) dated 18 t h
June, 2021.
16 Substituted vide Notification No. G.S.R. 419(E) dated 18 th June, 2021.
