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A contract modification that adds DISTINCT goods or services at a price reflecting the standalone selling price of those additional goods or services is accounted for as:
AA termination of the old contract and the creation of a new contract for all remaining goods or services
BA cumulative catch-up adjustment to the original contract
CA separate contract — accounted for independently of the original contract
DA partial reversal of revenue already recognised on the original contract
Answer & Solution
Correct answer: C. A separate contract — accounted for independently of the original contract
Para 20 of Ind AS 115 treats a modification as a SEPARATE contract only when BOTH conditions are met: (i) the modification adds distinct goods/services and (ii) the contract price increase reflects the standalone selling price of those additional goods/services. The original contract continues unchanged, and the new goods/services are accounted for independently.
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