Ind AS 115, Revenue from Contracts with Customers addresses a wide range of transactions including digital and intangible goods and services, subscription services and online platforms with innovative incentives, etc. As these goods and services are complex products, there could be challenges in interpreting the requirements of the standards or providing additional disclosures which would be useful to investors for understanding the contracts. This edition of Accounting and Auditing Update (AAU) contains an article on key accounting and financial reporting issues that regulators have highlighted in the area of revenue recognition with the help of illustrative examples and case study.
The publication also carries an article on - Securitisation arrangement involving investments in Pass Through Certificate (PTC) securities. Securitisation is used to monetise financial assets such as homogeneous consumer loans, credit card receivables, trade receivables or mortgage loans by selling newly created securities collateralised by these financial assets to investors. Such transactions are often executed using structured entities with the purpose of holding the interests in the securitised financial assets and to pass through cash flows earned on these financial assets to the investors. Accordingly, if financial assets are securitised using a structured entity, then determining whether those financial assets should be derecognised may be a complex issue and would need further assessment of the principles enunciated in Ind AS 109, Financial Instruments. Recently, the Expert Advisory Committee (EAC) of the Institute of Chartered Accountants of India (ICAI) deliberated on the accounting and disclosure of the sale consideration received from the Special Purpose Vehicle (SPV) and the investment in Pass Through Certificates (PTCs) by the originator under a securitisation arrangement. This article aims to discuss some of the key factors discussed by the EAC in reaching its opinion.
As is the case each month, we have also included a regular round-up of some recent regulatory updates in India and internationally.
We would be delighted to receive feedback/suggestions from you on the topics we should cover in the forthcoming editions of the AAU.
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