The company is engaged in the business of providing complete logistics services for containerised cargo. The company has been licensed at several locations by the Customs Department of Government of India to provide customs bonding services to customers in the export and import (EXIM) business.
The revenue from IW Bill is recognised not only for services rendered in respect of the goods to the destination by rail and road, but for custodianship of goods as well as for undertaking the guarantee on behalf of the customers to the custom authorities for safety of the goods and for handling and storage facilities etc., which together can be called ‘bundle of services’. It is further stated by the querist that, at the time of issuance of IW Bill, as the substantial portion of ‘bundle of services’ is complete, there is no significant uncertainty regarding the completion of service. In view of this, according to the querist, recognition of revenue by the company at the time of issue of IW Bill fully complies with the condition laid down in AS 9.
The company has sought the opinion on the following issues arising from the above:
The querist has sought the opinion of the Expert Advisory Committee as to whether the practice of the company to recognise revenue from providing ‘bundle of services’ on issuance of IW Bill is in compliance with the requirements of AS 9.
On the basis of the above, the opinion in respect of the issues raised by the company:
The Committee is of the view that, for the purpose of applying proportionate completion method and
completed service contract method, the company may have to ascertain whether it is feasible to segregate the consideration attributable to each of the services rendered by the company.
If it is feasible to do so, for each of the services, it should be determined whether proportionate completion method or the completed service contract method should be applied In case it is not feasible to segregate the consideration between the different services rendered by the company, the Committee is of the view that the company will have to determine whether the liabilities for risks related to non-performance of various services, borne by the company after the time of handing over the
containers to the carrier are significant or not.
The company may consider the performance as substantially complete and, accordingly, recognise revenue at the time of handing over the containers to the carriers.
The above opinion was affirmed by the ICAI-Expert Advisory Committee.
