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Issue 23 | June 2018

Ind AS 115, Revenue Contracts with Customers introduces comprehensive guidance for revenue recognition which applies to contracts with customers across all industries. Ind AS 115 will change the way in which banks account for customer loyalty programmes. Banks provide various incentives to credit card holders as part of their marketing schemes. In this issue of the Accounting and Auditing Update (AAU), we focus on the impact of Ind AS 115 on the accounting of customer loyalty programmes.

The publication also carries an article on accounting treatment of liquidated damages under a contract. Under current Indian GAAP, there is no specific guidance on accounting treatment of liquidated damages. The Expert Advisory Committee of the Institute of Chartered Accountants of India has considered the issue in relation to accounting of liquidated damages. The article summarises the guidance that is available under Indian GAAP and also compares it with the Ind AS 115 guidance and explains how the accounting would be impacted under the new revenue standard.

Companies may issue share warrants to private equity investors or to their lenders. Warrants issued to investors or lenders enable them to purchase additional shares in future at discounted/fixed prices. Under Ind AS, the issuer of such share warrants would need to classify them as equity or liability based on their contractual terms. However, such classification is generally not straight forward and may require significant judgement. The article on accounting of share warrants summarises the concept of equity and liability under Ind AS 32, Financial Instruments: Presentation and discusses certain practical issues such as anti-dilution features, contingent settlement provisions, reclassification of liability into equity, etc.

Our publication also carries a regular synopsis of some recent regulatory updates.