The paper "Company Accounting AASB" is an outstanding example of a finance and accounting assignment. You work for a start-up consulting company in a very competitive area. Your firm provides expertise to entities who wish to reduce their carbon footprint. The firm will typically send a team to a client’ s workplace to understand their business processes and identify where improvements can be made. After this, the firm produces a detailed report for the client. In order to build a business, the firm gets clients to pay 20 percent of the contract price upfront and the remaining 80 percent will be paid on receipt of the report.
If the client defaults, the firm can keep the 20 percent received. The firm has decided it will not pursue these claims in court, as the legal costs are likely to exceed the benefits. The managing director of the firm is not wildly delighted with these terms but has approved them, due to the cutthroat nature of this industry. He expects to manage this risk by selecting clients (such as government agencies, and other entities who can use this sort of report in their marketing) who are unlikely to play nasty games, such as paying their bills. Assume that your firm’ s financial year ends on the 30th of June 2019.
On the 1st of April 2019, the firm received $200,000 from a client for a report that is expected to be delivered to the client at the end of July 2019. The total contracted price is $1,000,000. Internal budgeting shows that your company expects to pay $550,000 to internal staff and $150,000 to external experts to produce the report.
These costs are expected to be incurred evenly over the period. An argument has broken out in the accounting team how these contracts should be accounted for. Kelly states that the company should recognise the $200,000 immediately and the remaining amount when the report is presented. On the other hand, Lee states that the company should recognise all of the $200,000 and some of the $800,000 in the current year, as the company’ s profits are not expected to be very strong this year. To further complicate things, Ngoc stated that no income at all should be recognised until the report is completed and given to the client. Required Your manager bumped into you at the end of financial year party.
He wants you to clarify this. That is, work out how much income should be reported this year and next year. Just after his 4th glass of red wine and before he fell out of his chair, he mumbled something about working out how many performance obligations there are in this contract. He is expected out of the hospital in a couple of weeks. Research AASB 15 and associated relevant documents to determine when your company should recognise the income from the client described above.
You need to specify the treatment of the $200,000 and the $800,000. You must identify and state any assumptions you make. These assumptions must be based on authoritative sources, and you must present specific references. (In this case – para XXX of YYY is fine. ) In this case, there is only 1 (one) performance obligation. That is, the firm is to produce detailed a report that the client will use for their activities.
ReferencesThe paper "Company Accounting AASB" is an outstanding example of a finance and accounting assignment. You work for a start-up consulting company in a very competitive area. Your firm provides expertise to entities who wish to reduce their carbon footprint. The firm will typically send a team to a client’s workplace to understand their business processes and identify where improvements can be mad