Page 6 - 19. COMPILER QB - INDAS 115

(b) The contract has been terminated and the consideration received from the customer is non-refundable.
Para 16 states that an entity shall recognise the consideration received from a customer as a liability until
one of the events in paragraph 15 occurs or until the criteria in paragraph 9 are subsequently met.

Depending on the facts and circumstances relating to the contract, the liability recognised represents the
entity‖s obligation to either transfer goods or services in the future or refund the consideration received. In
either case, the liability shall be measured at the amount of consideration received from the customer.
In accordance with the above, in the given case G Ltd. should account for the non- refundable deposit of
Rs.1,00,000 payment as a deposit liability as none of the events described in paragraph 15 have occurred—

that is, neither the entity has received substantially all of the consideration nor it has terminated the
contract. Consequently, in accordance with paragraph 16, G Ltd. will continue to account for the initial
deposit as well as any future payments of principal and interest as a deposit liability until the criteria in
paragraph 9 are met (i.e. the entity is able to conclude that it is probable that the entity will collect the
consideration) or one of the events in paragraph 15 has occurred. Further, G Ltd. will continue to assess

the contract in accordance with paragraph 14 to determine whether the criteria in paragraph 9 are
subsequently met or whether the events in paragraph 15 of Ind AS 115 have occurred.

Q3. (MAY 20)

Entity I sells a piece of machinery to the customer for Rs 2 million, payable in 90 days. Entity I is aware at
contract inception that the customer might not pay the full contract price. Entity I estimates that the
customer will pay at least Rs 1.75 million, which is sufficient to cover entity I's cost of sales (Rs 1.5 million)

and which entity I is willing to accept because it wants to grow its presence in this market. Entity I granted
similar price concessions in comparable contracts.
Entity I concludes that it is highly probable that it will collect Rs 1.75 million, and such amount is not
constrained under the variable consideration guidance.
What is the transaction price in this arrangement?

SOLUTION
Entity I is likely to provide a price concession and accept an amount less than Rs 2 million in exchange for
the machinery. The consideration is therefore variable. Entity I can also conclude that the collectability

threshold is met for Rs 1.75 million and therefore the contract exists. The transaction price in this
arrangement is Rs 1.75 million, as this is the amount which Entity I expects to receive after providing the
concession and it is not constrained under the variable consideration guidance.

Q4. (MAY 20)

On 1 January 20x8, entity J enters into a one-year contract with a customer to deliver water treatment
chemicals. The contract stipulates that the price per container will be adjusted retroactively once the customer

reaches certain sales volume, defined, as follows:
Price per container Cumulative sales volume
Rs 100 1 - 1,000,000 containers
Rs 90 1,000,001 - 3,000,000 containers
Rs 85 3,000,001 containers and above

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