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An entity enters a contract for 200 hours of customisation work at ₹150/hour (single performance obligation, satisfied over time). After 100 hours have been delivered, both parties agree to add 50 more hours at ₹100/hour. The remaining services are NOT distinct from those already provided. Under Ind AS 115, the modification is accounted for as:
AA separate contract for the additional 50 hours at ₹100/hour
BA termination of the old contract and creation of a new contract for the remaining 100 + 50 hours at ₹100/hour
CA customer-concession adjustment with no revenue impact until completion
DA cumulative catch-up adjustment using a new blended rate of ₹140/hour
Answer & Solution
Correct answer: D. A cumulative catch-up adjustment using a new blended rate of ₹140/hour
When the remaining goods/services in a modification are NOT distinct (part of a single performance obligation being progressively satisfied), para 21(b) requires a cumulative catch-up adjustment. Blended rate = (200 × 150 + 50 × 100) ÷ 250 = ₹140. Revenue for 100 hours already delivered = 100 × ₹140 = ₹14,000; the catch-up of ₹(1,000) brings previously-recognised ₹15,000 down to ₹14,000.
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