Aasb 15 Analysis

Revenue recognition accounting standard ensures the correct revenue is recorded for each period of the income statement, it was previously based on the realization principle - requires revenue to be recognized when the earning process is virtually complete and is certain to collectability. FASB & IASB developed a new revenue recognition standard, Revenue from Contracts with Customers,” on May 28, 2014, ASU No 2014-09. (RRPA Revenue Recognition and Profitability Analysis-1-LO1-5).

3.3 How is the standard price used in the accounting system? (Think about what you did in your cost/managerial accounting class.)

In 2018 it will be mandatory that AASB111 and AASB108 are replaced by AASB15. This new standards main principle necessitates entities to recognise revenue to portray the transfer of goods or services to customers in amounts that mirror the payment, of which the company expects to be entitled. AASB15 also provides regulation for transactions that were not previously addressed thoroughly, such as service revenue and contract modifications. Essentially it presents a 5 step system of Identifying the contracts with the customer, identifying the separate performance obligations in the contract, determining the transaction price, allocating the transaction price to certain performance obligations and recognizing revenue when or as the entity fulfils performance obligations – This is demonstrated towards the end of the report with a

The major benefit of this proposal is that agreement exists that there is more objectivity in measuring and determining changes in assets and liabilities than there is in measuring and determining the completion of the earning process. After taking comment letters on the discussion paper of December 2008 and an initial exposure draft in June of 2010, the boards issued a revision of the proposal in “Proposed Accounting Standards Update (Revised), Revenue Recognition (Topic 605) – Revenue from Contracts with Customers: Revision of Exposure Draft Issued June 24, 2010.” The new document left the basis of the proposal the same and added implementation guidance and a tentative date for adoption. Recognizing revenue under the standard would be a five-step

The FASB accounting codification is an advanced system that allows certified public accountants and other users to quickly access non-SEC authoritative content, perform relevant research, and submit timely and appropriate feedback. The FASB codification research system is a real-time, online database that allows users to access codification whose primary aim is to simplify the accessibility and structure of all authoritative generally accepted accounting principles, reduce the time and effort invested when researching accounting-related issues, decrease the risk of non-compliance with the generally accepted accounting principles, provide access to all authoritative information from a single place, facilitate the updating of accounting standards, and foster research and convergence efforts for the FASB (Wiley, 2017).

Absorption costing is used for all outside reports. All non-direct fixed costs are allocated using various allocation bases as indicated throughout the project. The Company does not use a full ABC costing system; however, it does employee some of the ABC concepts in the budgeting process.

Wide range of entities will be impacted by the introduction of AASB 15, especially in the industry of construction, manufacturing, telecommunications and real estate (Moore Stephens Australia, 2015). While Deloitte (2016) stated that many companies may face a challenging implementation as AASB could not only impact an organisation’s financial reporting, but also may have changes to existing processes, internal controls and other business elements. For Lend lease, many impacts might be arisen on transaction as it is a construction company. The first one can be concluded that by adopting AASB 15, construction companies like Lend lease can bring revenue forward. An example of AASB 15 may result in revenue being recognised earlier than existing accounting standard is where the construction contract includes an award bonus. AASB 15 will include the bonus from the

Develop payment strategies to reduce unwarranted price variation, such as reference or value pricing (e.g., analysis of price variation among network providers by procedure and service types, pilot value pricing programs,

Pricing is a pertinent issue in procurement and acquisition in organizations. Consumers buying the commodities of an entity should get clarity on pricing related issues. There is uncertainty in Pro

If a transaction is within the scope of specific authoritative literature that provides revenue recognition guidance, that literature should be applied. However, in the absence of authoritative literature addressing a specific arrangement or a specific industry, the staff will consider the existing authoritative accounting standards as well as the broad revenue recognition criteria specified in the FASB's conceptual framework that contain basic guidelines for revenue recognition.

The standard states that revenue is recognized when control is transferred and the customer can benefit from the product provided by the firm. Organizations will recognize each of the goods or services promised to a customer and determine if the goods represent a performance obligation, then recognize that revenue when the obligations are fulfilled. Companies will now assign the transaction price to each performance obligation in the contract on the standalone selling price of the goods or services, then recognize revenue when performance obligation is completed (FASB ASC 606-10-25). In the first transaction, with the new revenue standard, DSY would be able to recognize revenue. The product has been identified as belonging to the customer, the product is physically ready to be shipped and the company will not use it for another customer; therefore, the customer has gained control. The obligation to keep the goods until the customer’s warehouse is finished is on behalf of the customer. Since there is another performance obligation, DSY needs to estimate the stand alone price based on how long the service will be provided, which is three months from the purchase date. The transaction price would be allocated to the additional obligation and recognized over time as services are provided (FASB ASC 606-10-55-81). With the second transaction,

IAS 18 considers the accounting procedure of potential components of revenue organization primarily from transactions involving the sale of goods, rendering of services, as well as through other organizations or individuals property of the reporting organization, giving interest, dividends or royalties. If the probability of the economic

Exchange valuing is the setting of the cost for products and administrations sold between controlled (or related) legitimate elements inside a venture. For instance, if an auxiliary organization offers merchandise to a guardian organization, the expense of those products paid by the guardian to the backup is the exchange cost. Legitimate elements considered under the control of a solitary company incorporate branches and

There are five methods of transfer pricing that consists of traditional methods recommended by OECD of the Comparable Uncontrolled Price (CUP), Resale Price, and Cost Plus methods. The profit based methods, no recommended because they are considered insufficient in comparisons, are the Profit-splits and the Profit comparison (TNNM) methods. CUP compares the price charged in a controlled transaction to the price charged in an uncontrolled transaction in comparable circumstances. This method is reliable when the same product is sold between two associated enterprises. The Resale price is used to determine the price paid by the reseller for product from and associated enterprise and resold to an independent enterprise. It includes all costs of selling, operating, customs duties, and arm's length price. This method is usually applied to marketing operations. The Cost plus method is used to

There are several methods of setting transfer prices among profit centers within the same organization. Each profit center tries to set transfer prices which maximize their own profit. The buying and selling profit centers’ profits are largely affected by transfer prices. For example, when a high transfer price is charged, the selling division’s profits increase, while the buying division’s costs increase. So, transfer pricing should be established on a reasonable and objective basis, which should maximize the companywide profit, rather than being based on