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Under Ind AS 115, a salesperson's commission of 1% paid only on successful contract signing should be:
ATreated as part of the transaction price
BCapitalised as an asset and amortised over the period the related goods/services are transferred to the customer
CExpensed as incurred — sales commissions are sales expenses
DRecognised as a contingent liability until the contract is fully performed
Answer & Solution
Correct answer: B. Capitalised as an asset and amortised over the period the related goods/services are transferred to the customer
Para 91 — the commission is INCREMENTAL (paid only if the contract is won) and presumably the entity expects to recover it through the contract's economics. Capitalise and amortise over the period the related goods/services are transferred (often the contract term + expected renewals). This is a notable Ind AS 115 contrast to AS 9, which expensed sales commissions immediately.
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