Finance Essay

2493 words - 10 pages

EXPOSURE DRAFT “REVENUE FROM CONTRACTS WITH CUSTOMERS”
Name
Institution

Honest & Blonde
Address
Telephone number
TeleFones4U
Address:
Telephone number:
7 October 2014
Exposure Draft, “Revenue from Contracts with Customers”

Dear Sir,
It is our pleasure to provide our response and comments on the new exposure draft, which is on “revenue from contracts with customers” that was published by the FASB (Financial Accounting Standards Board) in the year 2011. TeleFones4U being one of the biggest telecommunication industry, it is with our great concern to bring your attention to some of the critical points in the new exposure draft. One of the concerns is based on the impact of ...view middle of the document...

The summary of the comments and responses that touch on the allocation of transaction prices are described as follows:
1. Inquire for further clarification and guidelines
Most respondents’ seek for clear clarification and proper guidelines on the two main types of stand-alone selling prices. This included stand-alone price selection. In addition to this, another inquiry was made on how to determine stand-alone prices for those particular goods and services that are moved to the customers during the period of the contract (Halford, 2012). A question is raised on whether an organization can use a single stand-alone selling price to allocate its transaction prices in a fixed price contract. As per the proposed exposure draft, the response to this question is that; an organization’s different goods or services are treated as a one performance obligation if and only if, those goods and services are transferred to consumers using one channel. This response has got the implication on communication entities, and, therefore, a clear guidelines and clarification is of importance. TeleFones4U also seeks for further guidance on the application of the residual approach in a case where the prices of goods and services vary greatly.
2. Allocation of discounts
It is noted that the ways that have been provided by the proposed exposure draft on how to allocate discounts to contracts are too strict. This is so because; it does not give a clear reflection of the economics of the transactions. TeleFones4U believes that stand-alone price selling price provides the basis of evident performance obligation. Therefore, it can be used to determine the allocation of discounts and to where the discount belongs. From the new proposed accounting, in the early stages of cost accounting, the discounts for the handsets will decrease. Therefore, the additional charges on the handsets will have to be discounted using a suitable discount rate. The higher rate of discounting will lead to reduction on additional charges and hence a reduction in the overall revenue.
3. The basis for allocation
Currently, entities in the communication industry use an accounting basis known as ‘contingent cap’. In this type of accounting, an entity provides contracts to its consumers by providing them with transactional prices. The consumer is sold a mobile handset at a price. With the same price, the customer is provided with an agreement to have access to network coverage at no cost. This accounting technique is dependent on the limited amount of transactional price that is allocated to a satisfied performance obligation, and does not depend on whether the consumer continues to perform the contract. When it comes to determining whether goods or services are to be approached as either separate performance obligation or not, wholly depends on the promise of the entity. The entity management task that claims to implement and create a contract do not make any transfer of goods or even...

Other assignments on Finance

Finance Essay

1171 words - 5 pages LYCEUM-NORTHHWESTERN UNIVERSITY Dagupan City GRADUATE SCHOOL CAUSES AND SYMPTOMS OF SEVERE ACUTE RESPIRATORY SYNDROME A Term Paper(Reaction Paper) Submitted In partial Fulfillment of the Requirements of business finance In the M.B.A Program Prepared

Finance Essay

707 words - 3 pages CAPM model. For beta, use the average beta of three selected competitors. You may obtain the betas from Yahoo Finance. Assume the risk free rate to be 3% and the market risk premium to be 4%. a. What is the cost of common equity? (5 pts) b. Explain the advantages and disadvantages to use the CAPM model as the method to compute the cost of common equity. Compare and contrast this method with the dividend growth model approach. (10 pts) 3

Finance

1743 words - 7 pages Bachelor of Business (Incorporating Graduate Diploma and Graduate Certificate in Business) Managerial Finance (ACCT 706) Semester Two, 2016 Assignment # 2 Due Date: Week 8, 03/05/16, 12.00 noon Weighting: 25% of the final grade Type: Individual Assignment Length: Approximately 2,000 – 3,000 words excluding appendices Submission: Students are expected to submit a hard copy of the assignment along with Arion

Finance - 3188 words

3188 words - 13 pages ------------------------------------------------- MINI CASE – Assume that you have just been hired as a business manager of PizzaPalace, a regional pizza restaurant chain. The company’s EBIT was $50 million last year and is not expected to grow. The firm is currently financed completely with equity, and it has 10 million shares outstanding. When you took your corporate finance course, your instructor stated that

Finance - 3708 words

3708 words - 15 pages preference shares from the net profit earned during the accounting period in order to arrive at the earnings attributable to ordinary shareholders. Dividend on redeemable preference shares is already deducted from the income statement as interest expense (finance cost) and hence no further adjustment is required in its respect in the dividend cover calculation. Under task 7, the DCR is just over 1.5 i.e. 1.65 times which indicates that the company

Gcu Finance

255 words - 2 pages Stephen A. Ross, Franco Modigliani Professor of Finance and Economics, Sloan School of Management, Massachusetts Institute of Technology, Consulting Editor Financial Management Adair Excel Applications for Corporate Finance First Edition Block and Hirt Foundations of Financial Management Thirteenth Edition Brealey, Myers, and Allen Principles of Corporate Finance Ninth Edition Brealey, Myers, and Allen Principles of Corporate Finance, Concise

Global Finance

3346 words - 14 pages Global Finance, Inc. is an international organization with expansions in many states. In every state, the company has a number of sites and each site has several workers and customers. Offices are interconnected to each other and to the host organization. As an international organization, Global Finance, Inc. requires a robust network that can support its daily operations, a secure network system and efficient network management strategies

Multinational Finance

565 words - 3 pages International finance Final Exam: Essay questions Fall 2015 Instructions: Choose five questions from the list of the questions below and give it a thoughtful answer. Please formulate your answers in your own words and give references when needed. You may look up in textbooks in the library or check relevant websites to answer. Each question is to be answered fully but concisely, each answer should not be exceeding 200 words per question

Corporate Finance

4966 words - 20 pages Corporate Finance, 9/e Stephen A. Ross, Massachussetts Institute of Technology Randolph W. Westerfield, University of Southern California Jeffrey F. Jaffe, University of Pennsylvania ISBN: 0073382337 Copyright year: 2010 Table of Contents PART I: Overview 1 Introduction to Corporate Finance 1 1.1 | What Is Corporate Finance? | 1 | | The Balance Sheet Model of the Firm | 1 | | The Financial Manager | 3 | 1.2 | The Corporate

Personal Finance

358 words - 2 pages Associate Level Material Appendix B Personal Financial Planning Worksheet Directions: Based on your readings and discussions in class this week, answer the following questions completely. The process of creating a detailed plan to meet your financial needs and prepare for the future is called: Developing goals. Personal financial planning. Collecting financial information. Personal finance. Which of the following is not one of

International Finance

876 words - 4 pages International Finance May 10, 2015 U.S International Debt Please look at the International part of the U.S. Government debt and discuss, 1) why the country has had to rely on International lenders, 2) why the situation with the International lenders may have caused the U.S. Federal Reserve System to initiate Quantitative Easing, and 3) give your opinion of the possible future state of the U.S. economy as it relies on International lenders

Similar Documents

Finance Essay 2359 Words

2359 words - 10 pages include Chinese language, Japanese Language among others. It is one of the largest companies in the Internet Information providers industry of the NASDAQ with a market capitalization of $42.55 billion as at 14th May 2012. The company was founded in the year 2000 and is headquartered in Beijing China (Yahoo finance, 2012a) Dendreon Corporation; this is accompany that is listed under the Biotechnology industry of the NASDAQ Stock Exchange whose

Finance Essay 265 Words

265 words - 2 pages Uttara University Department of Business Administration Program – MBA Semester –Autumn 2013 Course Title: Investment Analysis and portfolio Mgt. Course Teacher: Md. Azizur Rahman (Assistant Professor of Finance) Lesson Plan for Midterm |CHAPTER| |Investment, The Importance of Financial Investments, Investment Management Process, Measures of | |1

Finance Essay 856 Words

856 words - 4 pages The main purpose of studying finance is to gain an understanding of the financial performance of a company, corporation or industry. By looking at a company's financial performance, decisions can be made about many things by many different players. Corporations are rated by different agencies that examine financial records and potential for growth. Fitch ratings are a good example of this. My employer has an A++ Fitch rating. This high rating

Finance Essay 499 Words

499 words - 2 pages Finance FIN 1103 Week 3 Individual Work Perform Time Value Money Calculations Assignment Instructions | To complete this assignment: 1. Answer all of the questions below in the space provided. 2. Reflect on the information presented in this week’s lesson and provide an insightful response to each question writing no more than two paragraphs. | Save and Submit to Dropbox | 1. Save your work as a Microsoft Word 2010 (.docx