AlphaTech Ltd., a listed company, manufactures specialised industrial equipment and prepares its financial statements under Ind AS. For the year…

(a) Correct Accounting treatment under Ind AS 115 ‘Revenue from Contracts with Customers' Under Ind AS 115, revenue is recognised when, or as, a performance obligation is satisfied by transferring control of the promised goods or service to the customer. Accordingly, physical delivery or dispatch alone does not necessarily establish that revenue should be recognised. In the present case, the following factors are relevant: Acceptance testing: Testing had not been completed by 31 March 20X5. If the acceptance condition is substantive and control cannot be considered to have transferred before successful acceptance, revenue should be deferred. Right of return: Beta Industries had a contractual right to return the equipment. Accordingly, if control had otherwise transferred, AlphaTech would recognise revenue only to the extent to which it expects to be entitled, together with a refund liability and an asset for its right to recover the product, as applicable. Other terms: The equipment was highly customised, payment was conditional upon final acceptance, and the sales team had assured the customer of a full refund. These facts are relevant in determining the substance of the arrangement and whether control had transferred. Therefore, AlphaTech cannot recognise the entire ₹ 30 crore merely because the equipment was dispatched on 28 March 20X5. It must first establish whether control had transferred by 31 March 20X5 and apply the right-of-return requirements, as applicable. (b) Subsequent failure of acceptance testing and return The fact that Beta Industries failed the acceptance test shortly after year-end and returned the equipment is significant. At 31 March 20X5: acceptance testing was pending; the customer already had a contractual right of return; payment was conditional upon final acceptance; and the equipment had not successfully passed acceptance testing. Accordingly, the subsequent failure may provide additional evidence about conditions existing at the reporting date, rather than representing an entirely new condition arising in Financial Year 20X5-20X6. Therefore, the return cannot simply be ignored on the ground that it physically occurred after year-end. It should be considered in determining whether the original revenue recognition in Financial Year 20X4-20X5 was appropriate. (c) Responsibility of CA Rohan Rohan should not approve the ₹30 crore revenue merely to enable AlphaTech to achieve its revenue target. Management's revenue target is not a criterion for revenue recognition. He should: apply Ind AS 115 based on the facts and substance of the transaction; exercise professional integrity, objectivity and professional judgement; explain to management why the proposed accounting treatment may not comply with Ind AS; document his assessment and the relevant evidence; and if management refuses to make an appropriate adjustment, escalate the matter to the Audit Committee or those charged with governance, as appropriate. Rohan should not allow management pressure or revenue targets to override the requirements of Ind AS 115 and his professional responsibilities. (d) Consequences of failure to discharge professional responsibility: In case CA Rohan succumbs to the undue influence of the CFO and knowingly approves an accounting treatment that is not in accordance with Ind AS, he may be liable for professional misconduct under Clause 1 of Part II of the Second Schedule to the Chartered Accountants Act, 1949. The Clause 1 states that a member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, for contravening the provisions of this Act or the regulations made thereunder or any guidelines issued by the Council. As per the Guidelines issued by the Council, a member of the Institute who is an employee shall exercise due diligence and shall not be grossly negligent in the conduct of his duties. Accordingly, Rohan must exercise due care and professional judgment and should not allow management pressure or undue influence to override his professional responsibilities.