Name: Instructor: Task: Date: Introduction This assignment presents the following issues: when to recognize revenues as stated in the IAS 18; the application of the IAS 18 to the case of the IBI Ryan PLC; and a discussion of the meaning of creative accounting and earnings management, in relation to IBI Ryan’s case…
In the context of a company or a business unit, an income is what is mostly referred to as the earnings after interest, depreciation and tax (EADIT). The gain can be described as an increase in the amount of revenue and/or income by a specific amount, as compared to a previous figure (Gupta 213-250). According to IAS 18, revenue is supposed to be recognized exclusively under the following criteria: when a business unit has completed the transfer of ownership of goods; when a business has ceased exercising applicable managerial authorities and has given up any form of control over the goods; when the amount of the expected revenue can be determined with consistency; when it is certain that financial inflows resulting from a certain business transaction will be directed to an entity; and when expenditures and costs related to a business transaction can be measured with consistency (Christian and Lu?denbach 64-87). On the other hand, revenues obtained through the provision of services should be recognized “where the outcome of a transaction involving the rendering of services can be estimated reliably, associated revenue should be recognized by reference to the stage of completion of the transaction at the end of the reporting period. The importance of distinguishing between the terms in financial reporting is to facilitate the provision of reliable material information to the users of financial statement (International GAAP 328). The case study IBI Ryan PLC (the company) is a wholesaler of a wide range of consumer electronic, computing and telecommunications products. The company imports the bulk of its goods using container transportation and distributes from large regional warehouses to its customers, who range from individuals who have ordered on-line to large national retail chains. The company is finalizing financial statements for the year ended 31st March 2013. The company has experienced significant fluctuations in revenue and profits over the last 5 years. The financial statements as currently prepared, show an operating profit of ?51 million on revenue of ?4,003 million. According to the case, the company anticipated a delivery of the goods on Sunday the 31st March, one day before the preparation of the financial statements. Unfortunately, the delivery did not happen owing to a heavy snowfall for two consecutive days until Tuesday. The sales invoices showed a total sale of ?50,000. The delivery was not made but the company’s revenue for the financial year ending 31st March includes the sale. According to the requirements of revenue recognition as stated in the international accounting standards 18, the revenue of ? 50,000 could be measured with certainty and reliability. The cost incurred during the transaction could also be measured with a satisfactory level of certainty and reliability (? 25,000). The economic benefits of the transaction would flow to the company if the transaction were finalized. However, since the delivery was not done according to plan, within the financial period, the ownership of the goods was still with IBI Ryan. That means that the company did not pass the significant risk and reward of ownership of the goods to the buyer. Secondly, the company still had managerial authority and control over the goods. Therefore, the revenue ...
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ess). Though option D is also the correct answer but manufacturing accounts include direct as well as indirect manufacturing costs incurred during the year and these costs are further summed up together and transferred to the trading account. Hence it can easily be said that manufacturing accounts serves to calculate the costs of finished goods produced in a manufacturing business.
Question 1 By upholding ethics in their auditing exercise, I think independent certified public accountants can maintain an independent audit engagement even if their fees are paid by the entity. By adopting the aspect of objectivity, that excludes prejudice, compromise and bias, auditors gives fair view of the company financial position.
In addition, the contributions from the rating from the participants also increase. In the cases mentioned for the transactions in the IBI Ryan Plc Company, certain amount should be included in revenue for the year ended 31 March 2013. The cost of the electrical good worth ?
It is important to note that the time revenue is recognized has an effect on the financial statement of the period. According to the International Accounting Standard 18, revenue should be recognized when earned or when it becomes realisable (ACCA, Para. 9).
A list of grant recipients is required to be available, for example, in an appendix to the report, on request or through the Internet," (Department of the Prime Minister and Cabinet, op. cit., page 14).
Grants associated with income, as in the case of the subsidiary receiving the grant to educate its students, are sometimes represented as a credit in the income and expenditure statement.
Analyzing profit margin of the company, it can be determined the company had highest growth in profits during 2009-2011. This is because of the reason that during the period an increase of .80 percent in the net profit
If the asset is disposed off at the book value, then it does not result to any gain or loss.
Goodwill helps to keep old customers loyal to the business while at the same time attracting new customers through word-of-mouth recommendations and publicity.
In the same field, the aspect of financial capital maintenance is mostly measured in terms of constant purchasing power units or nominal monetary units. The most essential need for engaging in financial accounting is to assist in the reduction of