AS 9: Revenue Recognition
AS 9 lays down when revenue from sale of goods, rendering of services, and use of enterprise resources (interest, royalties, dividends) should be recognised in the profit and loss statement.
- Standard
- AS 9
- Core test
- Risk & reward
- Ind AS twin
- Ind AS 115
- Question type
- Case MCQ
Applicability
Applies to enterprises following Accounting Standards; entities under Ind AS instead apply Ind AS 115. Excludes revenue from construction contracts, hire purchase, and government grants.
Key points to remember
- Sale of goods: recognise when significant risks and rewards of ownership transfer to the buyer and no significant uncertainty exists about collection.
- Services: recognise by the completed service contract method or the proportionate completion method.
- Interest accrues on a time basis; royalties on an accrual basis per the agreement; dividends when the owner's right to receive payment is established.
- If collection is uncertain at the time of raising a claim, postpone recognition to the extent of uncertainty.
How the exam tests it
Case-based MCQs and short practical questions on the timing of recognition (goods despatched vs delivered, uncertain collection) appear regularly in Foundation and Intermediate papers.
Related standards
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Talk to usWhen is revenue from sale of goods recognised under AS 9?
When the seller has transferred the significant risks and rewards of ownership to the buyer, the seller retains no effective control, and there is no significant uncertainty regarding the consideration and its collection.
When are dividends recognised as revenue?
Dividends are recognised when the owner's right to receive payment is established — generally when the dividend is declared, not merely proposed.
How does AS 9 differ from Ind AS 115?
AS 9 uses a risks-and-rewards approach, while Ind AS 115 applies a single five-step, control-based model for revenue from contracts with customers. CA Final Financial Reporting tests Ind AS 115; AS 9 is tested at Foundation and Intermediate.