First Meeting (i) CA. P opened up the discussion on evaluation of the impact of changes in variable consideration based on the Indian Accounting…

First Meeting (i) CA. P opened up the discussion on evaluation of the impact of changes in variable consideration based on the Indian Accounting Standard. He pointed out that one of his clients has a fixed fee contract for 12,00,000 to develop a product that meets specified performance criteria. Estimated cost to complete the contract is 11,20,000. The entity will transfer control of the product over five years and the client uses the cost-to-cost input method to measure progress on the contract. An incentive award is available if the product meets the following weight criteria: Weight(kg) Award % of fixed fee Incentive fee (₹) 251 or greater 0 - 151-250 20% 2,40,000 150 or less 50% 6,00,000 (a) The client has extensive experience creating products that meet the specific performance criteria. Based on its experience, the client has identified five engineering alternatives that will achieve 20% incentive and two alternatives that will achieve 50% incentive. In this case, the client determined that it has 95% confidence that it will achieve 20% incentive and 25% confidence that it will achieve the 50 percent incentive. (b) Based on this analysis, the client believes 20% incentive to be the most likely amount when estimating the transaction price. Therefore, the client includes 20% award in the transaction price while calculating the revenue because the entity has concluded that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved due to its 95% confidence in achieving the 20% award. (c) The client reassesses its production status quarterly to determine whether it is on the track to meet the criteria for the incentive award. At the end of the year four, it becomes apparent that this contract will fully achieve the weight-based criterion. Therefore, the client revises its estimate of variable consideration to include the entire 50% incentive fee in the year four because, at this point, it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when including the entire variable consideration in the transaction price. (d) The client informed that the cost incurred is as follows and expect to remain same throughout the contract period: Year ₹ 1 60,000 2 2,00,000 3 5,00,000 4 3,00,000 5 60,000 (ii) CA. Q opened up discussion and pointed out that one of his clients has inventory of 200 finished cars on 31st March 2024 which are having a cost of 6,00,000 each. On 30th April 2024, as per new government rules, higher road tax and penalties are to be paid by the buyers for such cars (which has been expected to come) and hence the selling price of a car has come down and the demand dropped drastically. The selling price has come down to 4,50,000 each. The financial statements of the company for the year 2023-24 are not yet approved. His client wants to know the value at which the stock should be valued assuming the estimated costs necessary to make the sale is 25,000 per car. (iii) CA. R is running a partnership firm 'CDR' in practice and develops a website "CDR.com". The colours chosen for the website were very bright and the website was to run on a "Push" technology where the names of the partners of the firm and the major clients were to be displayed on the website without any disclosure obligation from any regulator. Second Meeting (i) CA. R informed that the internal auditor of a company of which he is doing statutory audit has pointed out two deficiencies in internal control of the company viz. (i) receivables not reconciled at regular intervals (i.e.) quarterly; and (ii) the buyers / customers are given credit limit based on their past track record but no review of such credit limits was undertaken during the year. The management of the company has also not taken any action on the deficiencies pointed out by the internal auditor. (ii) One of the clients of CA. S received the rectification order under section 254 of the Income Tax Act, 1961 passed by the Income Tax Appellate Tribunal (ITAT) beyond 6 months from the end of the month in which the order sought to be rectified was passed. The rectification of application was moved by the income-tax department after 6 months from the end of the month in which order sought to be rectified was passed. CA. S wants to check whether ITAT is empowered to do so. (iii) CA. S discusses that ABC is a registered supplier in Bhopal (MP) and is engaged in the manufacture of taxable goods. The goods valued at 12,50,000 were supplied by ABC to FPL, a registered supplier located at Indore (MP), without the cover of an invoice with a fraudulent intent. Since ABC evaded tax by not issuing the invoice for the supply, a show cause notice was issued by the proper officer under section 74 requiring ABC to pay tax@ 12% [₹ 1,50,000 and applicable interest and penalty]. ABC paid the tax, interest and penalty after the order was passed by the proper officer. Third Meeting In this meeting CA. S pointed out that in an order dated 20th December issued to SNPL, the Joint Commissioner, CGST has confirmed IGST demand of 320 crores. SNPL is disputing the entire demand of IGST. The Appellate Authority has confirmed the order of the Joint Commissioner and SNPL wants to file an appeal before the Appellate Tribunal against the order of the Appellate Authority. Fourth Meeting CA. Q states that Rajan was appointed as Provisional Liquidator for ST Ltd. against which an application for winding up was filed before the Tribunal. It is noteworthy that Rajan was having a shareholding in the same company.