Start from identified obligations and standalone prices
Ind AS 115 paragraph 81 treats the excess of the promised goods/services’ standalone selling prices over promised consideration as a bundle discount. Ordinarily allocate it proportionately across the performance obligations through relative standalone selling prices. A sales quotation that assigns all discount to a convenient line does not by itself establish accounting allocation.
Read the applicable text: ICAI Ind AS 115: paragraphs 81–83 and related allocation guidance ICAI 2025–26 compendium, Volume I.
The exception requires all paragraph 82 criteria
The entity must regularly sell each distinct good/service or bundle on a standalone basis, also regularly sell relevant subsets as discounted standalone bundles, and have substantially matching discount evidence demonstrating which obligation or obligations the contract’s entire discount belongs to. Preserve actual sales and comparability evidence. Management’s preference to report a higher margin on one product is not this evidence.
Calculate the allocation before recognising revenue
Confirm the accounting contract, distinct obligations, transaction price and supported standalone selling prices. Calculate each relative share and reconcile the allocated total to the transaction price. Allocation is not a direction to recognise all consideration at signing; each obligation’s performance and revenue timing remain separate.
Keep the residual-approach sequence correct
Paragraph 83 requires a discount supported as entirely attributable to selected obligations to be allocated before using the residual approach under paragraph 79(c) to estimate another standalone selling price. This does not make the residual approach universally available. Document its separate eligibility and preserve the allocation objective.
Distinguish other pricing issues
Variable consideration, later price changes and customer options have their own requirements. Do not assume that a fixed bundle discount can be reallocated freely whenever performance timing differs. Reassess the actual contract facts and applicable guidance rather than using a discount account as an unrestricted balancing figure.
Make the final file reproducible
Retain source prices, regular-sale evidence, contract consideration, exception conclusion and rounding method. The examples assume validated contract scope, obligations and prices, exclude taxes and financing, and distinguish total allocation from revenue recognised. Their percentages are relative-price calculations, not statutory tolerances for the paragraph 82 evidence test.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Two-obligation proportionate allocation
Standalone selling prices are ₹60,000 and ₹40,000, totalling ₹1 lakh. Contract consideration is ₹90,000, so the discount is ₹10,000. The 60:40 shares allocate consideration ₹54,000 and ₹36,000, with discounts ₹6,000 and ₹4,000.
Illustrative example 2: Three-obligation allocation
Standalone prices are ₹50,000, ₹30,000 and ₹20,000. Consideration ₹85,000 implies ₹15,000 discount. Relative shares of 50%, 30% and 20% allocate consideration ₹42,500, ₹25,500 and ₹17,000, totalling ₹85,000.
Illustrative example 3: Evidence-supported subset discount
Assume all paragraph 82 criteria establish that the entire ₹20,000 discount belongs to a B/C bundle regularly sold for ₹60,000 against standalone prices ₹50,000 and ₹30,000. A’s standalone price is ₹40,000 and total contract consideration ₹1 lakh. Allocate ₹40,000 to A and ₹60,000 to B/C; with no further allocation exception, B/C split that amount 50:30 into ₹37,500 and ₹22,500.
Illustrative example 4: No unsupported allocation exception
A and B each have standalone price ₹50,000 and contract consideration totals ₹80,000. Without the required observable evidence, assigning ₹50,000 to A and ₹30,000 to B is unsupported by the ordinary rule. Relative allocation is ₹40,000 each, shifting ₹10,000 from A to B compared with that draft.
Illustrative example 5: Allocation and recognised revenue differ
Use allocated consideration ₹54,000 for delivered equipment and ₹36,000 for a twelve-month service assumed to be satisfied evenly over time. After three service months, recognised service revenue is ₹9,000 and remaining service allocation ₹27,000. With the equipment obligation satisfied, total recognised revenue on those assumptions is ₹63,000, not the entire ₹90,000 allocated consideration.
Illustrative example 6: Reconcile rounding
Three equal supported standalone prices of ₹100 each share consideration ₹100. Simple two-decimal rounding gives ₹33.33 each, totalling ₹99.99. An explicitly documented one-paisa rounding allocation gives ₹33.34, ₹33.33 and ₹33.33, totalling ₹100. This bookkeeping reconciliation is not permission to alter the underlying allocation principle.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm the accounting contract | Executed terms and scope. |
| 2 | Identify distinct obligations | Supported performance-obligation analysis. |
| 3 | Establish standalone prices | Observable evidence or permitted estimation. |
| 4 | Determine transaction price | Supported consideration and exclusions. |
| 5 | Calculate the bundle discount | Standalone total less consideration. |
| 6 | Test every paragraph 82 criterion | Regular sales, subset bundles and observable attribution. |
| 7 | Apply the appropriate allocation | Proportionate rule or supported exception. |
| 8 | Check residual sequencing where relevant | Paragraphs 79(c) and 83 eligibility and sequence. |
| 9 | Separate revenue timing | Performance evidence for each obligation. |
| 10 | Reconcile totals and rounding | Final allocation tied to contract price. |
Sixteen practitioner FAQs
1. Does the quotation line discount determine accounting allocation?
Not by itself. Apply the relative-price rule and any supported exception.
2. Which paragraph states the ordinary discount rule?
Paragraph 81 of Ind AS 115.
3. Can the discount belong to only some obligations?
Yes, where all paragraph 82 criteria are met.
4. Is management preference sufficient evidence?
No.
5. Does one discounted invoice prove regular standalone bundle sales?
Do not assume that; establish the required pattern and comparability.
6. Must the whole discount attribution be supported?
Paragraph 82 requires the stated observable evidence linking the entire discount.
7. Does proportionate allocation use book costs?
The ordinary allocation uses relative standalone selling prices.
8. Does allocating consideration mean immediate revenue?
No. Determine satisfaction and recognition separately.
9. Can different performance dates justify arbitrary discount placement?
No.
10. Is the residual approach always permitted?
No. Its eligibility requires separate analysis.
11. What does paragraph 83 require about sequence?
Allocate the qualifying subset discount before the relevant residual-price estimation.
12. Are customer discount options the same issue?
They require their separate applicable guidance.
13. Are variable amounts automatically fixed bundle discounts?
No. Classify and apply the relevant provisions.
14. Do the examples include GST or financing effects?
No. They explicitly isolate allocation.
15. Can rounding differences be ignored indefinitely?
Reconcile the allocated total with a documented approach.
16. What is the final check?
The price evidence, allocation conclusion, total and revenue-timing working must agree.
Official sources
ICAI Ind AS 115: paragraphs 81–83 and related allocation guidance ICAI 2025–26 compendium, Volume I