Ask what acceptance actually proves
Under Ind AS 115 paragraphs B83–B86, a customer signature is not an automatic revenue trigger for every contract. Under B84, if the entity can objectively establish that the supplied good or service meets the agreed specifications, customer acceptance is a formality for that assessment. Revenue still requires the applicable transfer-of-control conclusion. Where it cannot establish conformity objectively, it cannot conclude that the customer has control until acceptance. For trial/evaluation deliveries without a payment commitment until the trial expires, control transfers on acceptance or expiry of the trial period under B86. Apply these tests to the actual contract rather than adopting a universal signed-certificate policy.
Read the applicable text: MCA Ind AS 115: paragraphs 22–38, 73–86, 105–106 and B83–B86.
Start with performance obligations and control
This guide applies to entities reporting under Ind AS and focuses on point-in-time acceptance and period-end evidence. Identify the promised goods or services and whether they are distinct under paragraphs 22–30. Then apply the control framework and relevant point-in-time indicators in paragraph 38. Passing one acceptance test does not override every other control condition. Contracts satisfying the over-time criteria require that separate assessment; a milestone signature alone does not convert all such revenue into point-in-time revenue. Keep the acceptance analysis linked to the identified obligation and the customer’s substantive rights.
Distinguish measurable compliance from a substantive unresolved test
Under B84, objective conformity may be demonstrable from measurements against agreed specifications, supported where relevant by experience with comparable contracts. Establish which specifications are decisive, who tested the delivered item and whether the evidence actually covers the item at the reporting date. A factory certificate that ignores required on-site performance may be insufficient. Under B85, where conformity cannot be determined objectively, outstanding customer acceptance matters because the entity cannot yet establish the required control conclusion. Do not treat a salesperson’s confidence or expected future success as completed acceptance.
Treat trials separately from normal credit sales
B86 addresses delivery for trial or evaluation where the customer is not committed to pay until the trial lapses. Record delivery, acceptance, expiry and any valid rejection separately. Physical possession and an invoice generated by the seller do not alone establish control in that case. Equally, an ordinary committed purchase with a separate return right requires the relevant return guidance; do not label every customer return period a no-commitment trial. Read the enforceable terms and preserve the customer’s actual election or the expiry evidence.
Keep remaining installation or services visible
B84 requires consideration of remaining performance obligations even where revenue precedes formal customer acceptance. If installation is distinct and the equipment’s control has transferred, allocated equipment revenue may precede installation revenue. If promises are not distinct, or the required integration/performance test prevents a control conclusion, a separate equipment invoice does not manufacture a completed obligation. Allocate transaction price using the standard’s allocation requirements rather than equating a contract’s cash-retention percentage with the value of the unfinished work.
Reconcile the cut-off file to accounting balances
For each material contract, record the obligation, price allocation, delivery date, conformity evidence, customer rights, acceptance/expiry date, remaining work and accounting conclusion. A customer advance does not itself create revenue: paragraphs 105–106 address presentation of contract balances and payment before transfer as a contract liability. Assess the correct asset and cost treatment separately; a zero-revenue conclusion does not mean the delivered asset or its costs disappear. Post-period acceptance can inform the factual investigation, but do not backdate a substantive future event merely to match the invoice date. The illustrations exclude taxes, financing and variable consideration and assume all other relevant recognition conditions are met.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: A signature that is only a formality
The entity delivers 100 units at an allocated ₹5,000 each by 31 March. It objectively proves compliance with the contractual specifications and all other control requirements are met; the later signature is only formal. Revenue is 100 × ₹5,000 = ₹5,00,000. The conclusion rests on the evidence and control analysis, not simply dispatch or the seller’s invoice.
Illustrative example 2: Substantive acceptance remains unresolved
A ₹12,00,000 equipment obligation is delivered before 31 March, but the entity cannot objectively determine compliance with the agreed acceptance specifications. Substantive customer acceptance occurs on 20 April. On these assumed B85 facts, March revenue is ₹0 and the obligation’s ₹12,00,000 is recognised in April when substantive acceptance and the other control requirements are met. A March invoice does not fill the missing evidence.
Illustrative example 3: Trial goods accepted after year-end
Forty devices at ₹15,000 each are delivered for a genuine no-payment-commitment evaluation. They remain under trial on 31 March and the customer accepts all on 10 April before trial expiry. The total is ₹6,00,000. March revenue is ₹0; April revenue is ₹6,00,000 on acceptance, assuming the remaining recognition conditions are met.
Illustrative example 4: Trial expiry rather than an affirmative signature
Twenty units at ₹25,000 each are under B86 trial terms at 31 March. The customer has not accepted or become committed to pay then. The trial lapses on 5 April without rejection and the terms establish control transfer on lapse. The value is ₹5,00,000: March revenue ₹0 and April revenue ₹5,00,000. Preserve expiry and absence-of-rejection evidence; do not assume every trial contract works this way.
Illustrative example 5: Distinct installation remains outstanding
A ₹10,00,000 contract has equipment and installation that have been established to be distinct. Their stand-alone selling prices are ₹9,00,000 and ₹1,00,000, and transaction price equals their sum. Equipment control transfers by 31 March with objective compliance; installation is completed in April. Allocation gives March equipment revenue ₹9,00,000 and April installation revenue ₹1,00,000. If the promises were not distinct, this split would not follow automatically.
Illustrative example 6: Mixed acceptance conclusions with one advance
Ten separately accounted-for units are allocated ₹80,000 each. Six meet objective compliance and control requirements by 31 March; four require substantive acceptance not yet obtained. Revenue is 6 × ₹80,000 = ₹4,80,000; the unresolved portion is ₹3,20,000. If the customer has paid the full ₹8,00,000 in advance and no other obligations or balance complications exist, the remaining contract liability is ₹8,00,000 − ₹4,80,000 = ₹3,20,000.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the reporting framework and period | Ind AS applicability and the closing date. |
| 2 | Identify each promised obligation | Contract and distinctness assessment under paragraphs 22–30. |
| 3 | Assess over-time or point-in-time recognition | Documented recognition model and control criteria. |
| 4 | Read the acceptance clause | Cancellation, remedial-action, payment and trial rights. |
| 5 | Map agreed specifications to evidence | Batch/serial-linked objective test reports at the reporting date. |
| 6 | Classify any unresolved substantive test | B85 conclusion and required customer evidence. |
| 7 | Track trials separately | Delivery, acceptance, expiry and rejection chronology. |
| 8 | Allocate remaining work | Stand-alone selling-price support and installation/service status. |
| 9 | Reconcile advances and revenue | Contract-by-contract revenue and contract-liability movement. |
| 10 | Approve the cut-off conclusion | Accounting entry, evidence references and unresolved exceptions. |
Sixteen practitioner FAQs
1. Does every missing acceptance signature block revenue?
No. B84 permits the objective-conformity analysis where the formal signature does not affect the established transfer of control.
2. Does obtaining a signature automatically permit revenue?
No. Apply the relevant performance-obligation and control requirements, including the substance of the acceptance evidence.
3. What makes acceptance substantive under B85?
The entity cannot objectively determine conformity with the agreed specifications, so it cannot yet establish the required control conclusion without acceptance.
4. Is dispatch evidence enough?
Dispatch is one fact; it does not itself establish contractual conformity or transfer of control in every arrangement.
5. Can past experience help the assessment?
B84 recognises experience with similar contracts as potential evidence, subject to relevance to the actual specifications and delivery.
6. What if the contract requires on-site performance testing?
Determine whether existing evidence establishes that specification. A different factory test should not be assumed sufficient.
7. Do all trial deliveries transfer control immediately?
No. B86 addresses no-payment-commitment trial/evaluation terms and points to acceptance or trial lapse.
8. Can trial expiry transfer control without a separate signature?
Yes on the B86 facts and relevant contract terms, with the other recognition conditions considered.
9. Is an ordinary product-return period always a B86 trial?
No. Analyse whether the customer is committed to pay and which return or trial guidance applies.
10. Must all installation delay equipment revenue?
No. Assess distinctness and control. A distinct remaining service can have a separate allocated amount.
11. Does a separately priced installation invoice prove distinctness?
No. Apply paragraphs 22–30 to the promises, rather than relying only on billing labels.
12. Is a cash-retention percentage the unfinished-service allocation?
Not automatically. Allocation follows the standard’s requirements and supporting selling-price analysis.
13. Does a customer advance prove revenue was earned?
No. Payment before transfer can create a contract liability under the contract-balance provisions.
14. Does zero revenue mean delivered trial inventory has no carrying value?
No. Assess the asset and costs under the applicable requirements separately from revenue recognition.
15. Can April substantive acceptance simply be backdated to March?
No. Establish the facts at the reporting date and distinguish later evidence of an existing condition from a future substantive event.
16. What should a reviewer be able to reproduce?
The obligation, specifications, control conclusion, acceptance/trial chronology, allocation and reconciliation to the revenue and contract balances.
Official sources
MCA Ind AS 115: paragraphs 22–38, 73–86, 105–106 and B83–B86