In recent times, a critical challenge in revenue recognition has emerged when another party is involved in providing goods or services to a customer. The key question is whether entities should recognise the gross amount of revenues and the related cost of sales, or report revenue on a net basis. This determination can have significant implications for financial reporting and decision-making. Ind AS 115, Revenue from Contracts with Customers, lays down the principles for revenue recognition based on the transfer of control of promised goods or services. When another party is involved, the entity must evaluate the nature of its promise to the customer. An assessment is required to determine whether the entity's promise is to provide the specified good or service itself (acting as a principal) or to arrange for it to be provided by another party (acting as an agent). This edition of Accounting and Auditing Update (AAU) highlights the guidance in Ind AS 115 with an illustrative example to determine whether entities are acting as principals or agents for the purpose of recognising revenue on a gross or net basis.
Sustainability reporting has gained importance among investors and other stakeholders in the business and capital markets ecosystem. With an increasing focus on non-financial information, companies are making enhanced sustainability disclosures. Despite the existence of many standards and frameworks on sustainability, such as the Global Reporting Initiative (GRI), International Standards Sustainability Board (ISSB), and Corporate Sustainability Reporting Directive (CSRD), measuring and reporting sustainability topics remains challenging for companies. To ensure accuracy and reliability, there has been a growing emphasis on assurance of sustainability information. In this regard, the International Auditing and Assurance Standards Board (IAASB) issued the International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements, in November 2024. The new standard provides a comprehensive framework for sustainability assurance engagements and applies to sustainability information reported across any topic and prepared under multiple frameworks. The article on this topic summarises the key aspects of ISSA 5000 and discusses important considerations for practitioners.
As always, we have included a regular round-up of recent regulatory updates in India and internationally.
We would be delighted to receive feedback and suggestions from you on the topics we should cover in forthcoming editions of AAU.
For more information on this update, please write to aaupdate@kpmg.com.
