Do not reprice the original allocation from today's price list
Ind AS 115 paragraphs 87–90 address later changes in transaction price. Paragraph 88 generally requires the same allocation basis used at contract inception, without reallocating to reflect later changes in stand-alone selling prices. The amount allocated to a satisfied performance obligation affects revenue in the period of the price change. A later credit or entitlement adjustment therefore needs a performance-obligation bridge, not simply a posting to the most recent invoice.
Read the applicable text: MCA: Ind AS 115, paragraphs 85 and 87–90; modification guidance in paragraphs 18–21.
Identify why the consideration changed
Establish the original price, current revised amount and evidence supporting the change. Uncertain events can resolve or circumstances can alter the expected entitlement. Determine whether the event is a transaction-price update or a contract modification changing scope or price; paragraph 90 directs modification accounting to paragraphs 18–21. This article assumes the measurement and constraint requirements have been applied before allocating the updated amount.
Preserve inception data
Retain the original performance obligations, stand-alone selling-price evidence, allocation percentages and any justified specific allocation. A current price list can be useful commercial evidence but is not authority to replace the inception allocation merely because market prices moved. Reconstruct missing inception workings from reliable records rather than using today's proportions without explanation.
Test specific variable-allocation conditions
Paragraph 89 requires the specific allocation to one or more, but not all, obligations or relevant distinct goods or services in a series where paragraph 85’s criteria are met. It is not an optional margin-management choice; the criteria must support departure from the general inception basis. Those conditions address a specific relationship to the efforts, transfer or outcome and consistency with the allocation objective. The sales team's preferred margin allocation or a credit-note caption alone does not establish the exception. Document the conclusion before departing from the general basis.
Determine what is already satisfied
For a fully satisfied obligation, recognise its allocated change in revenue or as a reduction in the period of change. An amount allocated to an unsatisfied obligation is not automatically current revenue. For partly satisfied obligations, apply the relevant recognition and progress analysis. Keep changes in transaction price distinct from changes in progress measures and avoid attributing every catch-up journal to the same cause.
Handle modifications through a separate chronology
Where a modification exists, record its date, whether it is treated as a separate contract and the relevant paragraphs 18–21 conclusion. For later price changes after a modification, paragraph 90(a) uses the pre-modification obligations only to the extent the change relates to variable consideration promised before the modification and that modification was accounted for under paragraph 21(a). In the other paragraph 90(b) cases where the modification was not a separate contract under paragraph 20, allocation is to the modified contract’s obligations that were unsatisfied or partly unsatisfied immediately after modification. Do not use a blanket original-allocation rule to bypass this branch. The examples isolate stated, independently supported facts; they are not a substitute for the modification analysis.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: General inception allocation
Two obligations have inception stand-alone selling prices ₹6,00,000 and ₹4,00,000, giving a 60:40 basis. A later supported ₹1,00,000 transaction-price increase allocates ₹60,000 and ₹40,000 on that general basis, assuming no applicable specific-allocation exception.
Illustrative example 2: Current list prices do not automatically reset the basis
In the same case, current stand-alone prices become ₹8,00,000 and ₹2,00,000. An 80:20 split of the ₹1,00,000 change would be ₹80,000 and ₹20,000. Paragraph 88's unchanged inception basis instead gives ₹60,000 and ₹40,000: a ₹20,000 difference for each obligation.
Illustrative example 3: One obligation already satisfied
Apply the ₹60,000 and ₹40,000 allocation above. Assume the first obligation is fully satisfied and the second wholly unsatisfied. The first ₹60,000 is current-period revenue from the change; the ₹40,000 follows future satisfaction of the second obligation, subject to the actual contract facts.
Illustrative example 4: A price decrease
A supported ₹50,000 reduction allocated on a 60:40 basis produces ₹30,000 and ₹20,000 reductions. If both obligations are fully satisfied, the total ₹50,000 reduces revenue in the period of change; do not treat a negative update as a new positive sale.
Illustrative example 5: Specific variable allocation is supported
Assume all paragraph 85 conditions are independently met for a ₹90,000 change relating entirely to the second obligation. Allocate ₹0 to the first and ₹90,000 to the second. This differs from the general 60:40 split of ₹54,000 and ₹36,000; documenting the exception is essential.
Illustrative example 6: Reconcile the revised total
Original transaction price ₹10,00,000 plus a supported ₹1,00,000 increase less a later ₹50,000 decrease gives ₹10,50,000. With an unchanged general 60:40 basis and no other events, cumulative allocated amounts are ₹6,30,000 and ₹4,20,000. Their sum must reconcile to the revised total before recognising the appropriate period amounts.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the original contract | Price, obligations and inception evidence. |
| 2 | Establish the current change | Reason, amount and support for revised entitlement. |
| 3 | Verify measurement requirements | Variable-consideration and constraint analysis where relevant. |
| 4 | Screen for modification | Scope or price change and paragraphs 18–21 conclusion. |
| 5 | Retrieve the inception basis | Original allocation and stand-alone selling-price support. |
| 6 | Test specific allocation | Paragraphs 85 and 89 conditions if relied upon. |
| 7 | Determine satisfaction status | Fully, partly or not yet satisfied obligations. |
| 8 | Calculate revenue effects | Current adjustment versus remaining allocation. |
| 9 | Apply post-modification rules | Paragraph 90 chronology and relevant obligation population. |
| 10 | Reconcile cumulative totals | Revised price, allocations, revenue and unrecognised amounts. |
Sixteen practitioner FAQs
1. Can transaction price change after inception?
Yes. Paragraph 87 describes changes arising from resolution of uncertainty or other circumstances.
2. Does a new price list automatically change allocation percentages?
No. Paragraph 88 preserves the inception basis for the stated general allocation.
3. What should happen to a change allocated to a satisfied obligation?
Recognise revenue or its reduction in the period in which the transaction price changes.
4. Is every allocated increase current revenue?
No. Consider whether and to what extent the relevant obligation is satisfied.
5. Can a price reduction produce a revenue reduction?
Yes, applying the relevant allocation and recognition rules.
6. Can one obligation receive the whole variable change?
Only where the specific-allocation conditions referred to in paragraphs 85 and 89 are met.
7. Does a credit-note description prove that exception?
No. Document the substantive relationship and allocation-objective assessment.
8. Are measurement and allocation the same step?
No. Establish the amount to include before allocating it.
9. Should current market proportions replace missing inception records?
Not automatically. Reconstruct and support the original basis.
10. Is a contract modification always dealt with only under paragraph 88?
No. Paragraph 90 refers modification accounting to paragraphs 18–21.
11. Can a later update relate to pre-modification variable consideration?
Paragraph 90 contains a specific branch for that situation with its stated conditions.
12. Does the modified-contract population always include all original satisfied promises?
No. Read the applicable paragraph 90 branch and modification conclusion.
13. Should price and progress changes be conflated?
No. Distinguish their causes and resulting recognition effects.
14. Does the invoice date alone determine the current revenue adjustment?
No. Apply the transaction-price and performance-obligation analysis.
15. What is the main arithmetic control?
Cumulative allocated amounts reconcile to the supported revised transaction price.
16. What should the reviewer reproduce?
The change's basis, original allocation, any exception, satisfaction status and current revenue effect.
Official sources
MCA: Ind AS 115, paragraphs 85 and 87–90; modification guidance in paragraphs 18–21
ICAI: Ind AS 115, 2025–26 compilation, paragraphs 85 and 87–90