Draft Income Computation And Disclosure Standard (Icds)

This Income Computation and Disclosure Standard is applicable for computation of income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” and not for the purpose of maintenance of books of accounts. 

In the case of conflict between the provisions of the Income-tax Act, 1961 (”the Act ”) and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent. 

Revenue Recognition: 

“Revenue” is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of a person from the sale of goods, from the rendering of services, or from the use by others of the person's resources yielding interest, royalties or dividends. 

(Words and expressions used and not defined in this Income Computation and Disclosure Standard but defined in the Act shall have the meanings assigned to them in that Act.) 

Scope 

This Income Computation and Disclosure Standard deals with the bases for recognition of revenue arising in the course of the ordinary activities of a person from 

• The sale of goods; 

• The rendering of services; 

• The use by others of the person's resources yielding interest, royalties or 

This Income Computation and Disclosure Standard do not deal with the aspects of revenue recognition which are dealt with by other Income Computation and Disclosure Standards. 

Sale of Goods:

• The revenue shall be recognised when the seller of goods has transferred to the buyer the property in the goods for a price or all significant risks and rewards of ownership have been transferred to the buyer and the seller retains no effective control of the goods transferred to a degree usually associated with 

• Where the ability to assess the ultimate collection with reasonable certainty is lacking at the time of raising any claim for escalation of price and export incentives, revenue recognition in respect of such claim shall be postponed to the extent of uncertainty 

Revenue shall be recognised when there is reasonable certainty of its ultimate collection. 

Disclosure: 

In a transaction involving sale of good, total amount of claim raised for escalation of price and export incentives but not recognised as revenue during the previous year along with nature of uncertainty about such claims. 

Rendering of services: 

Revenue from service transactions shall be recognised by the Percentage completion method. Under this method, revenue from service transactions is matched with the service transactions costs incurred in reaching the stage of completion, resulting in the determination of revenue, expenses and profit which can be attributed to the proportion of work completed. 

Income Computation and Disclosure Standard on construction contract shall mutatis mutand is apply to the recognition of revenue and the associated expenses for a service transaction 

Disclosure: 

• ØThe amount of revenue from service transactions recognised as revenue during the previous year; and 

• The methods used to determine the stage of completion of service transactions in
• For service transactions in progress at the end of previous year: 

• Amount of costs incurred and recognized profits (less recognized losses) upto end of previous year;
• The amount of advances received; and
• The amount of 

The transitional provisions of Income Computation and Disclosure Standard on construction contract shall mutatis mutandis apply to the recognition of revenue and the associated costs for a service transaction undertaken on or before the 31st day of March, 2015 but not completed by the said date. 

The Use of Resources by Others Yielding Interest, Royalties or Dividends: 

• Interest shall accrue on the time basis determined by the amount outstanding and the rate Discount or premium on debt securities held is treated as though it were accruing over the period to maturity.

• Royalties shall accrue in accordance with the terms of the relevant agreement and shall be recognised on that basis unless, having regard to the substance of the transaction, it is more appropriate to recognise revenue on some other systematic and rational 

• Dividends are recognised in accordance with the provisions of the

Transitional Provisions: 

Revenue for a transaction undertaken on or before the 31st day of March, 2015 but not completed by the said date shall be recognised in accordance with the provisions of this standard for the previous year commencing on the 1st day of April, 2015 and subsequent previous year. The amount of revenue, if any, recognised for the said transaction for any previous year commencing on or before the 1st day of April, 2014 shall be taken into account for recognizing revenue for the said transaction for the previous year commencing on the 1st day of April, 2015 and subsequent previous years.

This article is contributed by Partners of SBS and Company LLP – Chartered Accountant Company You can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.