Comparison Between As9 and Ias 18 Revenue Recognition

Comparison Between AS9 and IAS 18

Revenue Recognition

Revenue

The AS 9 issued by the ICAI which is mandatory in nature defines revenue as

"Revenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from sale of goods, from rendering of services, and from the use by others of enterprise resources yielding interest, royalties and dividends. Revenue is measured by the charges made to customers or clients for goods supplied and services rendered to them and by the charges and rewards arising from the use or resources by them."

IAS 18 states Revenue as follows:

Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

Some major Differences

AS 9 is based on the earlier IAS 18. AS 9 is presently under revision to bring it in line with the current IAS 18.

a) IAS 18 requires revenue to be measured at the fair value of the consideration received or receivable.

b) For recognition of revenue from sale of goods, IAS 18 prescribes the condition that the costs incurred or to be incurred in respect of the transaction can be measured reliably where as AS:9 does not prescribe this condition.

c) For recognition of revenue from rendering of services, IAS 18 requires that when the outcome of a transaction can be estimated reliably, revenue should be recognized with reference to the stage of completion, where as AS:9 provides an option to use either the proportionate completion method or the completed service contract method.

d) IAS 18 requires interest to be recognized using the effective interest method as per IAS 39 Financial...