IFRS 15 in Indian IT, Telecom and Real Estate: Real Cases

IFRS 15 in Indian IT, Telecom and Real Estate: Real Cases

By Sai Manikanta Pedamallu (ACCA, CMA US, CSCA US, CGMA, ACMA, Dip IFRS, M.Com, MBA, MA)

Lead Instructor, Global Fin X | www.globalfinx.in/manikanta

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Posts 11 through 13 covered the IFRS 15 framework: the five-step model, special topics, and contract costs. This post does something different. It takes three industries where IFRS 15 creates the most complexity in Indian practice and works through how the standard actually applies in each one.

Indian IT services, telecom, and real estate together account for a significant portion of the NSE 500's market capitalisation. All three were materially affected by the transition to Ind AS 115. All three continue to generate audit findings and investor questions around revenue recognition. And all three appear repeatedly in Dip IFRS exam scenarios precisely because they illustrate the five-step model applied under realistic commercial pressure.

I am not going to repeat the framework in this post. If you need a refresher on any step, the relevant post is linked at the end. What I want to do here is sit inside the commercial reality of each industry and show how IFRS 15 plays out in practice.

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Part 1: Indian IT Services

The Commercial Reality

Indian IT companies operate on two primary contract structures: time and material (T&M) and fixed price. A third structure, unit price, is used for volume-based work. Large outsourcing contracts often combine elements of all three.

T&M contracts are simpler from a revenue recognition standpoint. The entity bills for hours worked and materials consumed. The performance obligation is satisfied as the work is performed. Revenue is recognised over time as hours are incurred, measured by the actual hours multiplied by the agreed rate. There is no significant judgment in timing, though the principal versus agent question arises when subcontractors are involved.

Fixed-price contracts are where the complexity lives. The entity agrees to deliver an outcome for a fixed consideration. The entire contract is one performance obligation (usually) or a set of performance obligations (when deliverables are distinct). Revenue is recognised using a measure of progress toward completion, typically the cost-to-cost method.

Infosys: What Their Own Disclosures Say

Infosys's 20-F filing with the US SEC, which is prepared under IFRS, gives us the most transparent window into how a large Indian IT company actually applies IFRS 15. Their disclosed accounting policies cover three key judgments.

First: performance obligation identification for integrated services. Infosys identifies performance obligations by assessing whether promised deliverables are distinct. For contracts that combine design, development, testing, and implementation into a single integrated output for the client, the entire engagement is typically one performance obligation. For contracts where specific modules or workstreams are genuinely separable and the client can benefit from each independently, distinct performance obligations are identified.

Second: principal vs agent for third-party products and services. When Infosys procures third-party software licences or hardware on behalf of a client, it assesses whether it controls those products before transferring them. If Infosys is responsible for the overall delivery, takes inventory risk, and has pricing discretion, it recognises gross revenue. If it is merely facilitating the client's purchase of a third-party product with no meaningful control, it recognises net revenue (commission only).

Infosys evaluates whether it obtains control of the specified goods or service before it is transferred to the customer, considering primary responsibility, inventory risk, and pricing discretion to determine principal or agent status.

Third: fixed-price maintenance revenue. Infosys recognises fixed-price maintenance revenue on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period, or using a percentage of completion method when the pattern of benefits is not even through the contract period because services are discrete rather than repetitive.

That last distinction is subtle but important. A contract to maintain an application and handle support tickets, where the work is broadly even over time, uses straight-line. A contract to maintain an application but with a large data migration in month three followed by lighter ongoing support uses cost-to-cost progress measurement because the benefit transfer pattern is uneven.

Fixed-Price Contract: Full Worked Example

TechSolve Ltd wins a fixed-price contract to redesign and implement a supply chain management system for a manufacturing client. Contract price: Rs. 6 crore. Estimated total cost: Rs. 4 crore. Contract duration: 12 months.

The contract is a single performance obligation (integrated design, development, testing, implementation). Revenue is recognised over time using the cost-to-cost method.

Quarterly progress:

Note that Q4 revenue is low despite completion because most of the work and value transfer occurred in Q1 through Q3. The revenue recognised in each quarter reflects the value transferred, not the cash received or invoiced.

What if costs overrun? Suppose at Q3, TechSolve realises actual costs will be Rs. 5 crore, not Rs. 4 crore. The contract is still profitable (Rs. 6 crore revenue, Rs. 5 crore cost). But the cumulative revenue must be recalculated using the revised total cost estimate.

Revised Q3 cumulative: Rs. 340 lakh / Rs. 500 lakh = 68% complete. Cumulative revenue: 68% × Rs. 6 crore = Rs. 408 lakh.

Revenue to date before revision (Q1+Q2): Rs. 300 lakh. Catch-up adjustment needed: Rs. 408 lakh - Rs. 300 lakh = Rs. 108 lakh recognised in Q3 (not Rs. 210 lakh as originally calculated).

This catch-up mechanics is what makes fixed-price IT contracts operationally demanding. Every revision to the estimated total cost changes the completion percentage and requires a cumulative catch-up. Finance teams at IT companies run this calculation at every reporting date for every active fixed-price contract.

What if the contract becomes loss-making? Suppose costs escalate to Rs. 7 crore, making the contract a loss of Rs. 1 crore. IFRS 15 does not itself require loss recognition on onerous contracts. That falls under IAS 37. But the interaction is immediate: if a contract is onerous, a provision must be recognised for the unavoidable losses. Revenue is still recognised on the cost-to-cost basis to the extent of contract price, but the provision for the loss runs through the income statement separately.

Variable Consideration in IT: Performance Bonuses and Penalties

IT services contracts increasingly include performance-based elements. A managed services contract might pay a base fee plus a bonus if system uptime exceeds 99.9%, or impose a penalty if response times fall below agreed service levels. Both are variable consideration under IFRS 15.

Performance bonus: TCS has a five-year infrastructure management contract with a base fee of Rs. 10 crore per year. If system availability exceeds 99.95% in any year, the client pays an additional Rs. 50 lakh. TCS assesses at each reporting date whether it is highly probable that the bonus will be collected and that a significant reversal will not occur. If historical performance consistently exceeds the threshold and current trajectory confirms it, TCS includes the estimated bonus in the transaction price. If performance is borderline, the constraint on variable consideration may mean the bonus is excluded until the measurement period ends.

Service level penalties (SLA credits): The same contract imposes credits of Rs. 20 lakh per month if availability falls below 99.5%. TCS estimates the probability of triggering credits based on current system performance. Expected credits reduce the transaction price. If a credit has been triggered in the period, revenue is reduced in that period.

Contract Modifications in IT Services: A Real Pattern

Mid-contract changes are standard in IT. A three-year application development contract expands in scope when the client acquires a new business unit. The question is always: separate contract or modification of the existing one?

If the new scope adds work that is distinct from the original project (new modules for the acquired business that are not integrated with the existing system) and the price reflects SSP: Treatment A, separate contract.

If the new scope adds work deeply integrated with the original (the acquired business's processes must be embedded in the same system being built): Treatment B, non-distinct, terminate and create new.

Most large IT contract modifications in practice fall into Treatment B or C. The integration depth of enterprise software development means truly independent additions are rare.

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Part 2: Indian Telecom

The Commercial Reality

Indian telecom companies, primarily Bharti Airtel, Reliance Jio, and Vodafone Idea, offer bundled plans combining handsets, SIM services, data, and sometimes OTT subscriptions (Hotstar, Netflix, Amazon Prime). Each bundle potentially contains multiple performance obligations under IFRS 15. The allocation of transaction price between those obligations drives when and how much revenue is recognised.

The tariff environment has shifted significantly. India's top telecom players reported a 15% year-on-year jump in combined revenues in the March 2025 quarter, driven mainly by industry-wide tariff hikes of 11-25% in July 2024 and strong gains in mobile broadband users. As average revenue per user (ARPU) increases, the quantum of revenue subject to IFRS 15 allocation judgments also increases.

Performance Obligations in Telecom Bundles

Scenario 1: Airtel postpaid plan with handset

Airtel offers a postpaid plan: Samsung Galaxy handset plus 24 months of mobile services for a combined monthly payment of Rs. 1,999.

Step 2 analysis: two performance obligations. The handset (distinct, capable of being used independently, separately identifiable) and the network services (a series of monthly services, substantially the same pattern of transfer over 24 months).

Step 3: transaction price = Rs. 1,999 × 24 = Rs. 47,976 total.

Step 4: allocation based on standalone selling prices.

• Handset SSP: Rs. 22,000 (the phone's retail price if sold separately)
• Monthly service SSP: Rs. 999 per month × 24 = Rs. 23,976

Total SSP: Rs. 45,976. Transaction price is Rs. 47,976, which is a Rs. 2,000 premium over total SSP. This premium is allocated proportionally.

Step 5 timing:

• Handset revenue: Rs. 22,952 recognised at delivery (point in time, control transfers on handset hand-off)
• Network services revenue: Rs. 25,024 recognised over 24 months = Rs. 1,043 per month

Without IFRS 15, Airtel might have recognised the entire monthly payment of Rs. 1,999 as service revenue each month. With IFRS 15, Rs. 22,952 front-loads to month 1 (handset delivery), and the remaining Rs. 25,024 is spread over 24 months.

This is not a small difference. Multiplied across millions of postpaid subscribers with handsets, the front-loading of handset revenue and the corresponding contract liability (deferred revenue for the service portion allocated to upfront cash received) is material to the balance sheet.

Scenario 2: Jio bundled plan with OTT subscription

Jio offers a prepaid plan: unlimited calls, 2GB daily data, and a Netflix subscription for Rs. 999 per month.

Are there two performance obligations or one?

• The Netflix subscription: capable of being distinct (Netflix is sold separately). Is it separately identifiable? Jio does not create or control Netflix content. Jio is acting as a bundle facilitator. The Netflix subscription is a distinct service that the customer could obtain separately. If Jio has an arrangement with Netflix where Jio pays Netflix for each subscription included in the bundle, Jio is in substance an agent for the Netflix component (it does not control the streaming service before passing it to the customer). Net revenue only for the Netflix component.
• The Jio connectivity and data: Jio's own service. Principal. Gross revenue.

This analysis requires examining Jio's contractual arrangement with Netflix. If Jio pays a fixed per-subscriber fee to Netflix and passes the service through to customers at no additional margin, the agent conclusion is strongly supported. If Jio has negotiated a bulk licence at a discount and retains the margin, the principal conclusion may be more appropriate.

Activation fees and non-refundable upfront charges

Telecom companies sometimes charge activation fees or SIM setup fees that are non-refundable. Under IFRS 15, these fees are not a separate performance obligation unless they represent a distinct service. An activation fee that simply covers the cost of processing a new account, with no distinct service transferred to the customer at activation, is included in the transaction price and allocated to the network service performance obligation. It is recognised over the service period, not at activation.

This is a departure from how these fees were sometimes treated under old Indian GAAP. The activation fee reversal upon transition to Ind AS 115 reduced upfront revenue for telecom companies and increased deferred revenue liabilities.

Contract Liabilities in Telecom: The Prepaid Recharge Reality

Indian telecom is predominantly prepaid. Jio has over 450 million subscribers, the vast majority on prepaid plans. Every recharge creates a contract liability until the services are consumed.

When a customer recharges for Rs. 239 for 28 days of service, the Rs. 239 is a contract liability at the point of recharge. Revenue is recognised as services are consumed: daily as data is used, as calls are made, over the 28-day period. Unspent balances at expiry of the recharge validity are typically recognised as revenue at expiry (breakage), subject to assessment of whether the customer has a contractual right to a refund.

The aggregate of all outstanding prepaid balances at any reporting date represents a significant contract liability on Jio's balance sheet. Analysing the movement in this liability, how much was recognised as revenue versus how much expired as breakage, gives investors and analysts insight into actual network usage and customer behaviour.

Loyalty Points and Customer Options

Indian telcos run loyalty programmes. Airtel Thanks rewards customers with points redeemable for data top-ups, bill discounts, or partner benefits. Each point granted is a performance obligation if it represents a material right (a benefit the customer would not otherwise have).

Airtel estimates the standalone selling price of its loyalty points based on the redemption value discounted by the expected redemption rate. The portion of each payment allocated to loyalty points is deferred as a contract liability until redemption or expiry.

The breakage estimate is critical. If Airtel assumes 30% of points will expire unredeemed, then 30% of the deferred loyalty revenue is recognised as breakage over time (using a proportional basis as points are redeemed). If the actual redemption rate exceeds the estimate, the deferred amount is insufficient. If it falls below, deferred revenue is excessive. This is an area of ongoing estimate refinement.

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Part 3: Indian Real Estate

The Commercial Reality and the Bookings vs Revenue Gap

Indian real estate generates one of the most discussed mismatches in financial reporting: the gap between bookings (pre-sales) and recognised revenue. In Q3 FY26, Godrej Properties reported a consolidated net profit of Rs. 195 crore despite a 48.56% decline in revenue to Rs. 498 crore, while achieving a record booking value of Rs. 8,421 crore in the quarter.

That contrast, Rs. 8,421 crore of bookings versus Rs. 498 crore of revenue, is not an accounting failure. It is IFRS 15 working exactly as intended. Revenue is recognised when control transfers. Booking is a commercial event. The two are different.

Understanding this gap, and explaining it to boards, audit committees, and investors, is one of the most practically important applications of IFRS 15 in Indian practice.

Point in Time vs Over Time: The Indian Real Estate Debate

The most consequential IFRS 15 question for Indian real estate is when control of an under-construction unit transfers to the buyer.

The over-time argument: When a buyer signs a pre-sale agreement, pays instalments during construction, and the agreement specifies that the unit belongs to the buyer progressively as it is built, control may transfer over time. This was how many Indian real estate companies justified percentage-of-completion accounting under old Indian GAAP.

The point-in-time argument: In most standard Indian residential pre-sale contracts, the developer retains the right to substitute the unit (within tolerances) and does not give the buyer an enforceable right to the specific flat under construction. The developer can modify designs, floor plans, and finishes within agreed parameters. The buyer's right crystallises on possession. Control transfers at handover.

The ITFG conclusion: The ITFG examined this question for Ind AS 115 and concluded that for most standard residential pre-sale contracts in India, the performance obligation is satisfied at a point in time, on possession or completion of the sale deed, whichever is earlier depending on the specific contract terms.

The reason: the developer typically controls the asset as it is created. The buyer does not have a right to the specific asset under construction that the developer cannot change. The unit being built is not legally the buyer's until possession. Without a legally enforceable right to the specific asset as it is created, the over-time criteria are not met.

This was a significant change from old Indian GAAP practice for companies using percentage-of-completion. Revenue that was previously recognised progressively through construction is now recognised entirely at handover.

The Practical Consequence: Balance Sheet and P&L Timing

Consider Godrej Properties' pipeline. It launches a project with 500 units at Rs. 2 crore per unit. It sells 400 units in year 1. Construction takes three years. Handover occurs in year 3.

Under old GAAP (percentage-of-completion): revenue starts flowing in year 1 as construction progresses. By year 3, most revenue is already recognised.

Under Ind AS 115 (point-in-time on handover): zero revenue from this project in year 1. Zero in year 2. All Rs. 800 crore (400 units × Rs. 2 crore) recognised in year 3 when units are handed over.

The balance sheet in years 1 and 2 carries:

• Contract liabilities: instalments received from buyers before handover (advance receipts)
• Inventory: construction costs incurred (land, material, labour)
• No contract assets (because no performance has been delivered that entitles revenue recognition)

The year 3 P&L shows a spike in revenue. Analysts who do not understand Ind AS 115 sometimes interpret this spike as a sudden performance improvement. It is not. It reflects the completion of a three-year project.

This is why Indian real estate analysts focus on bookings (future revenue pipeline) and collections (cash conversion) rather than reported revenue alone. Revenue in any given year reflects completions and handovers from projects launched two to four years earlier.

What Counts as Control Transfer: Practical Indicators

Not every handover is identical. IFRS 15 does not define handover. It requires assessing when control transfers based on indicators:

• Transfer of legal title (sale deed registration)
• Physical possession (handing over keys and occupation certificate)
• Transfer of significant risks and rewards (customer bears property tax, maintenance, insurance from this date)
• Customer's acceptance (formal possession letter signed)
• Right to payment becoming unconditional (full consideration received or secured)

For most Indian residential transactions, all five indicators are satisfied simultaneously at possession, when keys are handed over along with the occupation certificate and the sale deed is registered.

For commercial properties and plotted developments, the analysis may differ. A plot sale where title transfers at registration but the developer retains no further obligations: control transfers at registration. A commercial building leased to the developer post-handover under a leaseback arrangement: the IFRS 16 and IFRS 15 interaction requires careful analysis.

Land Joint Development Agreements: A Specific Indian Complexity

Many Indian developers acquire land through Joint Development Agreements (JDAs) with landowners. The developer constructs on the land and shares units with the landowner in lieu of land cost. The landowner's share of units is settled at a point when specific units are allotted to the landowner.

From the developer's perspective:

• The land received from the landowner is consideration for the units to be transferred. It is non-cash consideration measured at fair value of the land at inception.
• The performance obligation is satisfied when the agreed units are transferred to the landowner.
• Revenue from the JDA is the fair value of land received, recognised when control of the agreed units transfers to the landowner.

The ITFG has addressed JDA accounting in multiple clarifications. The core conclusion: the developer recognises the land as inventory (or PP&E if retained) at the fair value of consideration given up (the units to be handed over) and recognises revenue when those units transfer control to the landowner.

For large Indian developers like DLF and Godrej Properties, which have significant JDA portfolios across cities, the timing and measurement of this revenue stream is material. A JDA for a prime Mumbai plot where fair value is Rs. 200 crore, settled against eight premium units, triggers Rs. 200 crore of revenue when those eight units are handed over. The timing depends on project completion, not the JDA signing date.

Variable Consideration in Real Estate

Indian real estate contracts often include variable elements:

Price escalation clauses: Some developer agreements include a right to increase the base price if construction costs exceed a threshold. This is variable consideration subject to the constraint. The escalation is included in the transaction price only when it is highly probable that a significant reversal will not occur. Typically, this means the escalation is included only when the trigger conditions are confirmed and the amount is known.

Area variation adjustments: The final saleable area of a unit sometimes varies from the agreed area by a small percentage. If the final area differs from the booked area, the consideration changes. This variability is estimated and constrained at contract inception.

Penalties for delayed possession: If the developer fails to hand over by the agreed date, RERA requires payment of compensation to buyers. These penalties reduce the transaction price. Expected penalties, if both probable and estimable, reduce the revenue recognised at handover.

RERA's compensation provisions have made this variable consideration assessment meaningful for Indian developers. Delays are common in the sector. A developer that has a pattern of late possession cannot simply ignore the expected penalties in its IFRS 15 variable consideration assessment.

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Cross-Sector Observations: What These Three Industries Have in Common

Three themes cut across IT, telecom, and real estate under IFRS 15.

The bookings-revenue timing gap. All three industries have business models where commercial activity (signing contracts, collecting bookings, adding subscribers) happens well before revenue recognition. Understanding this gap, and explaining it clearly in financial statements and investor communications, is an ongoing challenge in Indian corporate reporting.

Estimates drive everything. Fixed-price completion percentages, variable consideration amounts, SSP allocations, and breakage rates are all estimates. None are mechanical. All require judgment. The quality of those judgments is what differentiates disciplined financial reporting from aggressive reporting in all three sectors.

The balance sheet carries the story. Contract liabilities (deferred revenue) represent promises to deliver. Contract assets represent delivered but not yet billed or unconditionally payable amounts. The movement between contract assets and contract liabilities from year to year tells the story of how fast an entity converts its backlog into revenue. Analysts who read only the income statement are missing half the picture.

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What Big 4 Auditors Focus On Across These Sectors

IT services: completeness of performance obligation identification (particularly implicit post-delivery support), accuracy of percentage-of-completion calculations on large fixed-price contracts, and appropriateness of variable consideration estimates on performance-bonus contracts. Auditors also focus on whether the principal vs agent assessment for third-party products is properly documented.

Telecom: accuracy of SSP determinations for handset-service bundles, completeness of contract liability recognition for prepaid balances, and reasonableness of breakage estimates for loyalty points and expired prepaid credits. As ARPU increases with tariff hikes, the quantum of judgments increases proportionally.

Real estate: timing of revenue recognition relative to possession evidence, consistency of control transfer assessment across different project types, completeness of variable consideration estimates including RERA penalties, and appropriateness of JDA revenue timing and measurement. RERA complicates audit procedures because auditors must assess expected penalties based on actual project completion progress versus regulatory timelines.

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Dip IFRS Exam Angle

Real estate, telecom, and IT scenario questions appear regularly in Dip IFRS exams. The examiner uses these industries to test the five-step model under realistic commercial complexity.

For IT: expect a fixed-price contract with a cost overrun or a modification mid-contract. Be prepared to recalculate cumulative revenue with revised estimates and show the catch-up adjustment. Show your cost-to-cost calculation working.

For telecom: expect a bundled plan with a handset and service component. Identify the performance obligations, allocate the transaction price using SSP, and show revenue recognition timing for each. Know that the handset is recognised at delivery and the service is spread over the plan period.

For real estate: expect a pre-sale scenario requiring you to identify whether revenue is recognised over time or at a point in time. Apply the three criteria for over-time recognition. In most Indian residential pre-sale scenarios, the answer is point in time at handover. Justify it clearly.

Across all three: show the step-by-step workings. State your assumptions. Where a fact is ambiguous, acknowledge it and state the conclusion you reach under your assumption.

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FAQ

Why does Godrej Properties report large booking values but modest quarterly revenue?

Bookings are commercial events where buyers sign agreements and pay deposits. Revenue under Ind AS 115 is recognised at handover when control transfers. A project booked in year 1 generates revenue in year 3 when possession occurs. The gap reflects this timing difference, not a weakness in performance.

How does Infosys decide between straight-line and cost-to-cost for fixed-price maintenance?

The choice depends on whether the service delivery pattern is even or uneven. If the services are repetitive and broadly consistent over time, straight-line reflects the benefit transfer. If the contract has discrete phases with uneven effort distribution, cost-to-cost more accurately reflects progress. Infosys discloses this as a significant judgment in their IFRS filings.

Does the RERA compensation requirement affect how developers recognise revenue?

Yes. Expected compensation payable under RERA for delays is variable consideration that reduces the transaction price. If delays are probable and the compensation amount is estimable, the transaction price is reduced at the time of revenue recognition at handover. Developers with consistent delay patterns must reflect this in their variable consideration assessments.

How does Jio account for data that expires unused at the end of a recharge validity period?

Expired data is breakage. The deferred revenue (contract liability) associated with unused services that are expected to expire is recognised as revenue on a proportional basis as other services are consumed, or at expiry. The estimate of expected breakage is updated at each reporting date.

Is activation fee revenue recognised upfront or deferred?

If the activation fee is not for a distinct service (it simply processes the new account with no separate benefit to the customer), it is allocated to the overall service performance obligation and recognised over the service period. Upfront recognition of activation fees that do not represent distinct value delivered is not permitted under IFRS 15.

How do IT companies account for contracts where the client pays in advance for a block of hours?

Advance payments create a contract liability. Revenue is recognised as hours are consumed. Unconsumed hours at year end remain as contract liabilities. The contract liability represents the obligation to deliver services for which cash has already been received.

What is the revenue recognition treatment for Indian real estate plotted developments?

For a plotted development where the developer sells land (no construction obligation), control typically transfers at the point of title registration (sale deed). Revenue is recognised at that point. There are no construction performance obligations remaining. The analysis differs from an apartment pre-sale because the developer has no obligation to construct anything on the plot.

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Enroll with Global Fin X

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This is Post 14 of the Global Fin X IFRS Series. Previous: IFRS 15 Part 3B: Contract Costs. Next: IAS 20: Government Grants: Recognition, Presentation and Indian PLI Scheme Context.