Difference between Ind AS 11 on ‘Construction Contracts’, and existing AS 7 (revised 2002) on Construction Contracts

(i) Existing AS 7 includes borrowing costs as per AS 16, Borrowing Costs, in the costs that may be attributable to contract activity in general and can be allocated to specific contracts, whereas Ind AS 11 does not specifically make reference to Ind AS 23.

(ii) Existing AS 7 does not recognise fair value concept as contract revenue is measured at consideration received/receivable, whereas Ind AS 11 requires that contract revenue shall be measured at fair value of consideration received/receivable.

(iii) Existing AS 7 does not deal with accounting for Service Concession Arrangements, i.e., the arrangement where private sector entity (an operator) constructs or upgrades the infrastructure to be used to provide the public service and operates and maintains that infrastructure for a specified period of time, whereas Appendix A of Ind AS 11 deals with accounting aspects involved in such arrangements and Appendix B of Ind AS 11 deals with disclosures of such arrangements.

(iv) Agreements for construction of real estate are scoped in Ind AS 11. The effect of this inclusion is that percentage of completion method is to be applied for such agreements, whereas IASB has issued IFRIC 15 according to which in certain cases completed contract method would be applicable. (ICAI)