Compare Hkas 18 And HKAS 18

1148 Words3 Pages
bulb-icon

Recommended: Accounting case study

In the area of accounting, revenue is one of the most important items. At present, most companies and accountants use HKAS 18 “Revenue” and HKAS 11 “Construction Contracts” to record the revenues. However, HKFRS 15 “Revenue from Contracts with Customers” will be used for annual periods starting on or after 1 January 2017. Earlier application is permitted. In this essay, I will compare HKFRS 15 with HKAS 18 and HKAS 11 and find what will be changed with the use of the new principle. Revenue is one of the important measurement standards of the company business performance. As a result, the revenue recognition is quite essential. HKFRS 15 and HKS 11&18 have different accounting standards for the revenue recognition. In HKAS 18, revenue is the …show more content…

On the other hand, HKAS18 provides a single guidance for revenue recognition, which is quite broad, but it can help to solve the complex transactions, for example accounting for multiple-element arrangements. At present, the HKAS 18 and HKAS 11 only provide relatively limited information and criteria about different kinds of sophisticated revenue transaction. In contrast, I find out that the IFRS 15 has provided much more sophisticated criteria for accountants to determine when and how they should recognize revenue and costs. For example, sales commissions (which is considered as a contract cost) should be recorded together when revenue is recognized according to …show more content…

ABC Construction made a three‐year contract to build a vessel for Southeast Power. Presented below is information about the contract. ABC can determine the outcome of the contract reliably when the contract is 20% complete. Year 1 Year 2 Year 3 (1) Cost incurred to date $250,000 $796,250 $1,200,000 (2) Estimated cost to complete 1,000,000 428,750 0 (3) Progress Billings to Date 250,000 775,000 1,400,000 (4) Cash Collections to Date 225,000 695,000 1,100,000 (5) Contract Price $1,400,000 According to HKAS 11, accountant will recognize the revenues and costs according to the stage of completion. In this problem, the company used the cost basis. As you can see, the company used the cost incurred to estimate the total cost and then get how much of the contract they have completed. And then they used the statistics to recognize the revenues and costs of each year. At last, they can get the financial statement as the table

Show More
Related

  • Financial Forecast for Goldengate Capital

    1780 Words  | 4 Pages

    In order to determine the value of operations, and using proforma income statement and balance sheet statement, Cash flow statement was formulated for the next 5 years. The Account Receivables plus the Inventory minus the Account Payable was determined as Net Operating Working Assets. An organization cost of 0,000 was amortized over the 5-year period.

    Read More

  • Durango Manufacturing Company: Accounting and Financial Areas

    2346 Words  | 5 Pages

    One must understand that the integral core of a company rests in its accounting and financial areas. The departments’ need employees with an advanced knowledge and skill set to ensure the payment of supplies and accounting on the expenditure is correctly recorded. If the accounting desk presents inaccurate spending calculations on behalf of the company, it could result in spending more than what has actually been earned; this could lead to the company not only being unable to increase in revenue, but also experience loss. It is imperative that the management of the financial department is well informed and able to make decisions by taking into account the usage of every coin stated in the expenditures, and also to know the amount of revenue the company is making so that we can plan on better strategies to improve the revenues (Lu, Madu, Kuei & Winokur, 1994).

    Read More

  • Sun Ship Case Study

    1087 Words  | 3 Pages

    California and Hawaiian Sugar Company contracted Sun ship to build a vessel. The contract gave Sun Ship almost two years to complete the work. The contract contained a liquidated clause that required Sun Ship to pay 17,000 dollars per day for ever day that the ship was not delivered after the agreed date. The ship was delivered after eight and a half months after the agreed delivery date. During the period, the ship had not been delivered, California and Hawaiian Sugar Company suffered actual losses of 368,000 dollar. The defendant refused to pay the liquidated damages and the plaintiff brought an action to recover the damages.

    Read More

  • The Truth in Negotiations Act

    1050 Words  | 3 Pages

    ...hing that was not ever the easiest type of contract to navigate but over the years the requirements have continued to get more complicated and require a lot of additional effort on the contract and the contracting officer. A contracting officer does not just accept the data supplied by the supplier as acceptable. A contract officer will have to perform due diligence and verify the information submitted. This means that the contracting officer will have to verify the material costs, the labor costs, the travel costs, and any of the data supplied.

    Read More

  • Using Biblical Principles For Making Wise Business Decisions

    1993 Words  | 4 Pages

    ABC Company has hired the consulting firm of CEG Consultants to look into the financing of this project and to see if this is the best decision at this time. Besley & Bringham (2008, p. 148) write that “if a firm is considering whether to increase operations by adding capital projects to existing assets that will help produce either more of its existing products or entirely new products, expansion decisions are made.” CEG Consultants will review all options to best benefit ABC Company for their decision. We realize that the owners of ABC Company are leaning toward a building expansion, but we are hired to bring other optio...

    Read More

  • Deprecation At Delta Airlines And Singapore Air Lines

    1506 Words  | 4 Pages

    The amount each company should recognize as expense is given in a given year depends on the following factors

    Read More

  • Operational Plan For Australian Hardware Company

    753 Words  | 2 Pages

    As the company investment is based on the profit generated in last year’s so the budget of the project will be defined after annual report is published which define the annual revenue of this company.

    Read More

  • The Differences Between the GAAP and the IFRS Accounting Systems

    1089 Words  | 3 Pages

    In the world of international finance there are two major accounting systems; GAAP, which stands for Generally Accepted Accounting Principles, and IFRS, which stands for International Financial Reporting Standards. The United States prefers GAAP while the European market, as well as many other countries, prefers IFRS. By 2015 the Securities Exchange Commission is anticipating a total transfer to IFRS in the United States. Though the differences between GAAP and IFRS are few, they could affect accuracy of financial reporting throughout the world. It is important to understand the differences and similarities between both GAAP and IFRS if one is to globalize ones market (Logue).

    Read More

  • Budget Analysis

    1842 Words  | 4 Pages

    Marshall, M.H., McManus, W.W., Viele, V.F. (2003). Accounting: What the Numbers Mean. 6th ed. New York: McGraw-Hill Companies.

    Read More

  • Enterprise Resources Planning (ERP) Implementation

    1634 Words  | 4 Pages

    Stair, R.M., Reynolds, G.W., Gelinas, J.U. Jr., Sutton, S.G., Hunton, J.E., Albright, S.C., Winston, W.L. & Zappe, C. (2007) Accounting Information Systems and Financial Modelling, Thomson, South Melbourne, Victoria, Australia.

    Read More

  • Cost Accounting: Its role and ethical considerations

    1039 Words  | 3 Pages

    Cost Accounting: Its role and ethical considerations Introduction: Accounting is the process of identifying, measuring, and communicating economic information about an entity for the purpose of making decisions and informed judgements. The major areas of within the accounting are: Financial Accounting, Managerial Accounting/Cost Accounting and Auditing- Public Accounting Managerial accounting is concerned with the use of economic and financial information to plan and control the activities of an entity and to support the management in planning and decision-making process. Cost accounting is the subset of managerial accounting and it helps management in determination and accumulation of product, process or service cost. Role of Cost Accounting: Increased competition and uncertain business conditions have put significant pressure on corporate management to make informed business decisions and maximize their company?s financial performance. In response to this pressure, a range of management accounting tools and techniques has emerged.

    Read More

  • uniform accounting standard produce uniform financial reporting

    593 Words  | 2 Pages

    Accounting standard is a set of guidelines that financial accountants have to follow in preparation and presentation of business incomes, expenses, assets and liabilities. This helps to ensure that the treatments of these items are fair and just, hence making the financial statements a reliable source for users. There are many types of accounting standards being used all over the world. More than 120 countries such as the European Union, Singapore, India, Taiwan, Australia and Canada adopt the International Financial Reporting Standard (IFRS), which is developed by the International Accounting Standard Board (IASB). It is a principle-based approach. On the other hand, United States of America is using the Generally Accepted Accounting Principles (GAAP) developed by Financial Accounting Standard Board (FASB), which is rules-based. Over the last decade, these two boards have been working together towards convergence. (1) Why did they take this approach? Why is it important to practise the same standard across firms and countries? It is said that uniform accounting standard produces uniform financial reporting. Hence, all financial information will be treated and presented in the same manner globally.

    Read More

  • Essay On Challenges Of Accounting

    1025 Words  | 3 Pages

    Accounting dates back as far as first centuries, is the language of business. As everything has gone through many changes, accounting has also changed many times through out the centuries. It went from the use of abacus to the most advanced softwares, and computers. With these drastic improvements nowadays accounting, financial accounting and management are facing big challenges. From the presentation of the reports to communication to the users, investors, and owners, the accounting field has gained totally a new shape from two decades ago. Today with the dynamic change in every aspect of life, the accounting field has to act fast and be able to adapt these new changes and challenges in order to survive.

    Read More

  • Accounting: Accounting And Accounting

    841 Words  | 2 Pages

    The revenue/cost period-: Revenue and the cost period in accounting that the company get income from normal business activities. It’s referred to normal business income that the company got by selling their product and service.

    Read More

  • Accounting Regulatory Bodies Paper

    721 Words  | 2 Pages

    The success of a company is very dependent upon its financial accounting. In accounting there are numerous Regulatory bodies that govern the accounting world. These companies are extremely important to a company because they set the standards when it comes to the language and decision making of a company. These regulatory bodies can be structured as agencies, associations, commissions, and boards. Without companies like the Security and Exchange Commission (SEC), The Financial Accounting Standards Board (FASB), the Governmental Accounting Standards Board (GASB), Internal Accounting Standards Board (IASB), Internal Revenue Service (IRS), and other regulatory bodies a company could not make well informed decisions. In this paper the author will look at only four of them.

    Read More

More about Compare Hkas 18 And HKAS 18

Open Document