Page 23 - 19. COMPILER QB - INDAS 115

Q24. (NOV 19)

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Nivaan Limited commenced work on two long-term contracts during the financial year ended on 31 March,
2019.

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The first contract with A & Co. commenced on 1 June, 2018 and had a total sales value of Rs 40 lakh. It
was envisaged that the contract would run for two years and that the total expected costs would be Rs 32

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lakh. On 31 March, 2019, Nivaan Limited revised its estimate of the total expected cost to Rs 34 lakh on the
basis of the additional rectification cost of Rs 2 lakh incurred on the contract during the current financial

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year. An independent surveyor has estimated at 31 March, 2019 that the contract is 30% complete. Nivaan

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Limited has incurred costs up to 31 March, 2019 of Rs 16 lakh and has received payments on account of Rs
13 lakh.

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The second contract with B & Co. commenced on 1 September, 2018 and was for 18 months. The total sales
value of the contract was Rs 30 lakh and the total expected cost is Rs 24 lakh. Payments on account already
received were Rs 9.50 lakh and total costs incurred to date were Rs 8 lakh. Nivaan Limited has insisted on a
large deposit from B & Co. because the companies had not traded together prior to the contract. The

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independent surveyor estimated that on 31 March, 2019 the contract was 20% complete.
The two contracts meet the requirement of Ind AS 115 ―Revenue from Contracts with Customers‖ to recognize
revenue over time as the performance obligations are satisfied over time.
The company also has several other contracts of between twelve and eighteen months in duration. Some of
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these contracts fall into two accounting periods and were not completed as at 31 March, 2019. In absence of

any financial data relating to the other contracts, you are advised to ignore these other contracts while

preparing the financial statements of the company for the year ended 31 March, 2019.
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Prepare financial statement extracts for Nivaan Limited in respect of the two construction contracts for the

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year ending 31 March, 2019.
SOLUTION

Extracts of Balance Sheet of Nivaan Ltd. as on 31 March, 2019
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Rs in lakh
Current Assets
Contract Assets- Work-in-progress (Refer W.N. 3) 9.0
Current Liabilities
Contract Liabilities (Advance from customers) (Refer W.N. 2) 4.5

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Extracts of Statement of Profit and Loss of Nivaan Ltd. as on 31 March, 2019

Rs in lakh
Revenue from contracts (Refer W.N. 1) 18
Cost of Revenue (Refer W.N. 1) (15)
Net Profit on Contracts (Refer W.N. 1) 3

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