Page 10 - 19. COMPILER QB - INDAS 115

Q9. (MAY 21)

A property sale contract includes the following:
A) Common areas
B) Construction services and building material
C) Property management services

D) Golf membership
E) Car park
F) Land entitlement
Analyze whether the above items can be considered as separate performance obligations as per the
requirements of Ind AS 115?

SOLUTION
Ind AS 115 provides that at contract inception, an entity evaluates the promised goods or services to
determine which goods or services (or bundle of goods or services) are distinct and therefore constitute a

performance obligation.
A performance obligation is a promise in a contract to transfer to the customer either:
● a good or service (or a bundle of goods or services) that is distinct; and
● series of distinct goods or services that are substantially the same and that have the same pattern of

transfer to the customer.
As per Ind AS 115, a good or service that is promised to a customer i s distinct if both of the following
criteria are met:
(a) the customer can benefit from the good or service either on its own or together with other resources
that are readily available to the customer (i.e. the good or service is capable of being distinct); and
(b) The entity‖s promise to transfer the goods or service to the customer is separately identifiable from

other promises in the contract (i.e. the promise to transfer the goods or service is distinct within the
context of the contract).
Each performance obligation is required to be accounted for separately.
Based on the above guidance, the following table discusses whether the common goods and services in
property sale contract should be considered as separate performance obligation or not:

Goods/Service Whether a separate Reason
Performance
obligation (PO) or
not
A. Common Unlikely to be Common areas are unlikely to be a separate performance
areas separate PO obligation because the interests received in common areas are
typically undivided interests that are not separable from the
property itself.

However, if the common areas were sold separately by the
developer, then they could be considered as a separate
performance obligation provided that it is distinct in the
context of the contract.

19. 9