Case 12-05

In: Business and Management

Submitted By irenexz
Words 457
Pages 2
Requirement 1: 605-36 Revenue Recognition
(1) Complete Contract Method 25-61 An entity using the percentage-of-completion method as its basic accounting policy shall use the completed-contract method for a single contract or a group of contracts for which reasonably dependable estimates cannot be made or for which inherent hazards make estimates doubtful. 25-90 When lack of dependable estimates or inherent hazards cause forecasts to be doubtful, the completed-contract method is preferable. 25-97 Circumstances to be considered in determining when a project is substantially completed include, for example, delivery of the product, acceptance by the customer, departure from the site, and compliance with performance specifications.

(2) % Contract Method - Not Preferable 25-56 The use of the percentage-of-completion method depends on the ability to make reasonably dependable estimates, which, for purposes of this Subtopic, relates to estimates of the extent of progress toward completion, contract revenues, and contract costs 25-57 The percentage-of-completion method is considered preferable as an accounting policy in circumstances in which reasonably dependable estimates can be made and in which all the following conditions exist: a. Contracts executed by the parties normally include provisions that clearly specify the enforceable rights regarding goods or services to be provided and received by the parties, the consideration to be exchanged, and the manner and terms of settlement. b. The buyer can be expected to satisfy all obligations under the contract. c. The contractor can be expected to perform all contractual obligations. IAS 11-23 In the case of a fixed price contract, the outcome of a construction contract can be estimated reliably when all the following conditions are satisfied: (a)total contract revenue can be…...

Similar Documents

Mini Case 12

...Chapter 12: Mini Case 1 Computer Dynamics Computer Dynamics is a microcomputer software development company that has a 300-computer network. The company is located in three adjacent five-story buildings in an office park, with about 100 computers in each building. The current network is a poorly designed mix of Ethernet and token ring (Ethernet in two buildings and token ring in the other). The networks in all three buildings are heavily overloaded, and the company anticipates significant growth in network traffic. There is currently no network connection among the buildings, but this is one objective in building the new network. Describe the network you would recommend and how it would be configured with the goal of building a new network that will support the company’s needs for the next 3 years with few additional investments. Be sure to include the devices and type of network circuits you would use. You will need to make some assumptions, so be sure to document your assumptions and explain why you have designed the network in this way. I would recommend creating a multi switch VLAN. VLANs offer two other major advantages compared to the other network architectures. The first lies in their ability to manage the flow of traffic on the LAN and backbone very precisely. VLANs make it much simpler to manage the broadcast traffic that has the potential to reduce performance and to allocate resources to different types of traffic more precisely. The bottom line is that......

Words: 270 - Pages: 2

12 Case Law

...Plus Connexion Découvrez le navigateur Google Chrome doté d'une fonction de traduction automatique.Télécharger Google ChromeIgnorer Traduction Case study # 1: Albert, Bernard, Claude, Daniele, Eric, Frank and Gaëlle associated in SA. Albert is also a partner in a SCI he created with his family. Parents each hold a 45% stake and 10% are divided equally between his two children. Eric meanwhile is associated equally with a friend in a limited liability company to perform an activity in industrial cleaning. SA has created a subsidiary form of CNS in which it holds a 90% stake and Claude Frank and holds the remaining 5% each. Franck is married, without a contract and a home owner with his wife and himself had built after their marriage, as well as a farm. SCI, SARL and SNC are each a sum of € 20,000 to a supplier. What can happen to Albert, Eric, Claude Franck and if these companies do not pay what they owe to the supplier? A supplier who can he ask to pay 20,000 euros owed by the company? For which this application is it not possible, and why? * The case of Albert: In a civil society, there is unlimited liability and not integral partners. That is to say that if unpaid debt, the creditor must apply to each partner's share of the debt, a proportional share allocation of capital between them. In this case, Albert holds 45% stake, also his wife, and his children, 5% each. Thus, the supplier can not claim that € 9000 to Albert, or 45% of the debt of 20,000......

Words: 1546 - Pages: 7

Deloitte Case 12-1

...Case Study 12-1: An Unlikely Alliance Florabama is a power producer of which Meyer Inc. is a 60% owner and Saban Company is a 40% owner. Saban has a cost-plus arrangement that permits it to purchase up to 20% of the power produced by Florabama at the cost plus a fee. The remaining power produced by Florabama is sold to third parties. The profits and losses of Florabama are split based on ownership. Sale, transfer, or disposition of ownership requires written consent of the other party in advance. Both parties are independent and willingly agreed upon the prior approval terms. The board is composed of 10 individuals that Meyer and Saban are able to appoint based on their ownership percentage (Meyer has 6 and Saban has 4). The board makes all strategic decisions and establishes operating and capital budgets. The board also determines the pricing of power produced and appoints the CEO. The CEO that was appointed was the COO of Saban and he will oversee the day to day operations of Florabama. Both Meyer and Saban bear equity price risk. Meyer Inc. also has operating risk since the decisions of the board are made by simple majority (Meyer owns the majority). Saban bears commodity price risk due to the cost-plus arrangement. Meyer and Saban are both variable interest holders. Saban has an equity interest in Florabama and it also has the cost-plus arrangement, both of which make Saban a variable interest holder. Meyer Inc. is a variable interest holder in Florabama due to......

Words: 396 - Pages: 2

Case 12-05 "Aren't We Done Yet?"

...NAME DATE CLASS CASE STUDY LabCo, a large construction-contracting firm, is faced with the decision of switching from the percentage of completion method to the completed contract method for one of its contracts with one of its customers, Halibut. The contract called for a six-axis laser, cutting machine that would be used to cut aircraft wings for fighter jets that would be sold by Halibut to a large government buyer. LabCo realized that this would be a unique arrangement that would require a lot of specifications, however, based on its experience with similar contracts and with working with Halibut before, LabCo decided that the percentage of completion would be appropriate for this contract. As this project progressed, LabCo encountered many problems. Their chief financial officer finally decided that the amount to be estimated for this contract could no longer be reliably estimated, and that the percentage of completion method would no longer be the appropriate method for recognizing revenue. LabCo’s accounting policy for the revenue treatment of its contracts is quite reasonable. First of all, LabCo’s business primarily involves the design and manufacture of large industrial-sized machinery and tooling that is used by its customers in manufacturing parts and components for fighter jets, transport planes, and other aerospace-related machinery and equipment which falls under the contracts covered in ASC 605-35-15-2,3. ASC 605-35-15-2 covers contracts as “binding......

Words: 905 - Pages: 4

Case 12-05

...Case 12-05 Aren’tWe Done Yet? LabCo is a large construction contracting firm that serves a variety of industrial customers that purchase machinery and equipment from LabCo. LabCo’s business primarily involves the design and manufacture of large industrial-sized machinery and tooling that is used by its customers in manufacturing parts and components for fighter jets, transport planes, and other aerospace-related machinery and equipment. All of LabCo’s construction contracts involve the design, development, and manufacture of machines that are unique and customized to the specifications of its customers. LabCo negotiates all its contracts with its customers on either a fixed-price or cost-plus basis. LabCo has developed an accounting policy to recognize revenue related to its customized construction contracts, which reads as follows: The Company performs under a variety of contracts, some of which provide for reimbursement of cost plus fees, and others that are fixed-price-type contracts. Revenues and fees on these contracts are primarily recognized on a contract-by-contract basis using the percentage-of-completion method of accounting, which is most often based on contract costs incurred to date compared with total estimated costs at completion (cost-to-cost method). The completed-contract method of accounting is used in instances in which reliably dependable estimates of the total costs to be incurred under a specific contract cannot be made. LabCo has entered into a......

Words: 796 - Pages: 4

Case 12-02 de

...Case 12-02 To Recognize or Not to Recognize, That Is the Question Shakespeare Inc. (“Shakespeare” or the “Company”) is a privately held book printing and publishing company with a December 31 year-end. The summary balance sheet as of December 31, 2010, included: Current assets Noncurrent assets Total assets Current liabilities Noncurrent liabilities Total liabilities Total shareholder equity $ 6,500,000 28,250,000 $34,750,000 $ 4,500,000 13,750,000 $18,250,000 $16,500,000 The summary results of operations for the year ended December 31, 2010, included revenue of $10.7 million and net income of $1.2 million. Shakespeare is planning to issue its financial statements on March 20, 2011. On March 18, 2011, Shakespeare’s management will evaluate new information about one of its accruals and two subsequent events to determine if this information or events represent items that should be recognized or disclosed in the December 31, 2010, financial statements. Medical Benefits Payable For the past several years, Shakespeare has self-insured medical benefits (health and dental) for its employees. The Company records the costs of medical care in the period in which covered events occur and includes its best estimate of the costs that have been incurred but not yet reported (IBNR) in its estimate of the medical benefits payable. Shakespeare looks to the FASB Accounting Standards Codification, which defines IBNR as “losses incurred by the insured entity that have not yet been reported to...

Words: 967 - Pages: 4

Case 12-05: Aren’t We Done Yet?

...Case 12-05 Aren’t We Done Yet? LabCo is a large construction contracting firm that serves a variety of industrial customers that purchase machinery and equipment from LabCo. LabCo’s business primarily involves the design and manufacture of large industrial-sized machinery and tooling that is used by its customers in manufacturing parts and components for fighter jets, transport planes, and other aerospace-related machinery and equipment. All of LabCo’s construction contracts involve the design, development, and manufacture of machines that are unique and customized to the specifications of its customers. LabCo negotiates all its contracts with its customers on either a fixed-price or cost-plus basis. LabCo has developed an accounting policy to recognize revenue related to its customized construction contracts, which reads as follows: The Company performs under a variety of contracts, some of which provide for reimbursement of cost plus fees, and others that are fixed-price-type contracts. Revenues and fees on these contracts are primarily recognized on a contract-bycontract basis using the percentage-of-completion method of accounting, which is most often based on contract costs incurred to date compared with total estimated costs at completion (cost-to-cost method). The completed-contract method of accounting is used in instances in which ...

Words: 795 - Pages: 4

Trueblood Case 12-5

...TrueBlood Case 12-5 LabCo is a large construction contracting firm involved in the manufacturing of equipment that is used by other companies to manufacture parts and components for planes, jets and other machines and equipment of the air. Each machine produced by LabCo is tailored made to suit each of its many industry customers. As previously stated LabCo uses a variety of contracts primarily percentage-of-completion based, however, is that the correct approach to take? In addition the firm has recently entered into a fixed price contract with a high level of detail and heavily involved performance specification with Halibut, LabCo intends to use the percentage-of-completion method with this contract. When the contract was accepted and commencement began a great deal of difficulties arose that increased the expenses that LabCo had estimated and pushed back the completion date. With all of the difficulties that LabCo has faced the question should it use another method to account for the contract and if so what method should they use? The purpose of this report is to answer the two previously stated questions which are, under IFRS how should LabCo account for its construction contracts in general and what method should they use in regards to their newest contract with Halibut in the face of numerous complications. Normally special order equipment could include numerous costs that the firm would be unaware of until they arose. In regards to LabCo though, their......

Words: 830 - Pages: 4

Case 12-05

...relates to estimates of the extent of progress toward completion, contract revenues, and contract costs 25-57 The percentage-of-completion method is considered preferable as an accounting policy in circumstances in which reasonably dependable estimates can be made and in which all the following conditions exist: a. Contracts executed by the parties normally include provisions that clearly specify the enforceable rights regarding goods or services to be provided and received by the parties, the consideration to be exchanged, and the manner and terms of settlement. b. The buyer can be expected to satisfy all obligations under the contract. c. The contractor can be expected to perform all contractual obligations. IAS 11-23 In the case of a fixed price contract, the outcome of a construction contract can be estimated reliably when all the following conditions are satisfied: (a)total contract revenue can be measured reliably; (b)it is probable that the economic benefits associated with the contract will......

Words: 301 - Pages: 2

Case 12

...Bally Total Fitness Case 1 2011 Fall Comm 400 Health Club Industry Bally Total Fitness was a leading firm in the health club industry. Since market competition had intensified, Bally’s stock price dropped leading to an investigation by the Security and Exchange Commission. To improve Bally’s current position, we apply the Porter’s Five Forces Model to analyze its external environment. The competitive rivalry in health club industry is intense as there are many small or equally sized competitors. In addition, exit barriers are high because of higher capital costs and operation costs, indicating that the health club industry is hard to exit. Equipment makers are the industry’s major suppliers. Suppliers have high bargaining power because there are only a small number of well-known suppliers. Consumers are the buyers and have moderate bargaining power when choosing a health club, because there are numerous clubs in the industry. But once they are committed to memberships, they have a lower bargaining power. The threat of substitute products is high. Consumers can workout at home, outdoors, or at gyms within their workplaces. Besides, they can go to health spas designed for workouts. Nutritional and athletic products are complimentary to the health club industry. The threat of new entrants is rather low because it is difficult to acquire decent real estate or a good location; also, exercise equipments are highly valued. Consumers who have had a good experience with......

Words: 665 - Pages: 3

Case 12-5

...renewable and oil and gas segments. * 2 sides: investing and financing side; actual cash flow loans and debt equity. * Small loan portfolio (2 billion loans) the rest will be with debt equity. * Assets less non debt liabilities is how GE views * Small platform but very detailed and demanding on how they manage specific deals. CRE: Commercial Real Estate: * 50/50 debt and equity; flow business and discrete business * 2007 they wanted to sell equity book and unfortunately it couldn’t be completed * Equity assets are more risky they are required to gain revenue or bad. * 1600 loans (debt) real estate assets; 1400 individual properties on equity side * 700 employees (21 b assets) North America, 330 Europe (12 b assets), 175 Asia-Pacific (6 b assets) * Floating Rate book in Japan * 61% debt, 39% equity; most assets are office than owner occupied; mostly operated in North America. * Investment by NEA (Net Earning Assets) 10MM- 50MM (MM = 1 Million) * Thin amortization over 30 years, 3 year hold at the end which causes a large balloon payment in the end (311 deals) * Originators, underwriters; people trying to get deal approved by specialists * Pulling specific levels to get deal closed * Stamford building (treasury building) raises the debt to fund equity transactions, it doesn’t create income in this building that is the Norwalk office (equity building). GECAS- GE Capital Aviation Services: * Aircraft......

Words: 1614 - Pages: 7

Case Study Module 05

...Executive Summary Case Study of Care-Link The focused case study in brief, is about a leading “Pharmaceutical Company” (Care-Link) operated for the past 10 years in Sri Lanka. Care-link Imports & distributes Pharmaceuticals & healthcare related products all over the country having branches in the main cities and fully operated from the head office in Colombo. The Employee strength of Care-link is approximately 300 including Managers, Executives and Workers. The problem raised In January 2009, with the appointment of the new CEO Mr. Dylan Perera (DP), as he was concerned about the high costs involved in the Training & development (T&D) department. The CEO was not satisfied nor convinced with the output of the company’s high budget T&D programs, even after several justifications made by the T&D Manager also the Product trainer, Mr. Ravi Fernando (RF) of Care-Link. It was an alarming situation that the Staff is not up to the marked performance. The CEO believes there are issues related T&D and anticipates RF to provide effective T&D Plans for budget approvals. As the HR consultant for Care-Link, I have analyzed key issues related to T&D initiatives & evaluation also about the consequences of NON T&D issues. The Scope is discussed in detail and elaborated in the paper with limitations & assumptions. The case Concludes with recommendations and suggestions made to the T&D Manager Mr. Ravi Fernando & the senior management on HR initiatives to make the training Function more...

Words: 1708 - Pages: 7

Lecture 05 -Case Study (1)

...St. Dismas Assisted Living Facility Case 1: Planning the Project St. Dismas Medical Center, an urban, nonprofit, 450 - bed rehabilitation hospital began to see a significant decline in admissions. St. Dismas’ mission focuses on inpatient and outpatient rehabilitation of the severely injured and catastrophically ill. While the patient census varied from month to month, it appeared to the St. Dismas Board of Trustees that the inpatient population was slowly but steadily declining. The hospital’s market researchers reported that fewer people were being severely injured due to the popularity of seat belts and bicycle/motorcycle helmets. In order to get a handle on the future of the organization, the Board, and the CEO, Fred Splient M.D. called for a major strategic planning effort to take place. In January 1999, St. Dismas held a planning retreat to identify future opportunities. The outcome of the retreat was that the Medical Center needed to focus its efforts around two major strategic initiatives. The first, a short run initiative, was to be more cost - effective in the delivery of inpatient care. The second, a long- run strategy, was to develop new programs and services that would capitalize on the existing, highly competent rehabilitation therapy staff and St. Dismas’s excellent reputation in the region. At the time of the retreat, Fred Splient’s parents were living with him and his family. Fred was an active member of the “sandwich generation.” His parents were aging and......

Words: 1608 - Pages: 7

Chapter 12 Case Study

...timely tasks, and stay within a budget that is predetermined. Resources Rose, K. H. (2007). Linking Project Management to Business Strategy. Project Management Journal, 38(3), 93. doi:10.1002/pmj.20011 Bryde, D. (2008). Perceptions of the impact of project sponsorship practices. International Journal of Project Management, 26, 800--809. Kloppenborg, T. J., Tesch, D., & Manolis, C. (2014). Project Success and Executive Sponsor Behaviors: Empirical Life Cycle Stage Investigations. Project Management Journal, 45(1), 9-20. doi:10.1002/pmj.21396 Söderlund, J., & Müller, R. (2014). Project Management and Organization Theory: IRNOP Meets PMJ. Project Management Journal, 45(4), 2-6. doi:10.1002/pmj.21442 Purohit, B. (2015). A case study on processes in team building and performance improvement at Government Health Centers in Rajasthan, India. International Journal Of Medicine & Public Health, 5(4), 372-377. doi:10.4103/2230-8598.165985 Powell, J. W. (2008, 08). USING the WORK BREAKDOWN STRUCTURE to IMPROVE SALES. Contract Management, 48, 50-53,55. Retrieved from http://search.proquest.com/docview/196312231?accountid=32521...

Words: 1766 - Pages: 8

12 Angry Men Case

...12 Angry Men is a gripping drama that depicts twelve American jurors confined to a jury room on a hot and humid summer day to decide the guilt or innocence of a defendant in a murder trial.1 Before sending out the twelve jurors to deliberate, the judge reminds them that their verdict must be unanimous and that if they hold “reasonable doubt” as to the guilt of the accused then their verdict must be “not guilty.” If, however, they find the defendant guilty then he will be sentenced to death. Eleven of the jurors, believing that the prosecution has presented an “open-and-shut”case,quickly vote for conviction.They believe that the young, poor Puerto Rican defendant, who has a criminal record and lives in the “slums,” killed his father with a switchblade knife. The sole initial dissenter is Juror 8, played in the film by Henry Fonda, who votes“not guilty” as the deliberations begin. As the film proceeds, he deconstructs the pros- ecution’s case, progressing from communicating a sense of vague uneasiness to articulating a precise refutation of the other jurors’ specific arguments. The Negotiation Environment To analyze the negotiation environment in 12 Angry Men, we adopt the methodology outlined by Rojot (1991), who wrote that a negotiation is structured by the relationship between the parties, the resources and con- straints within the environment, and the bargaining power. Rojot identified two significant dimensions for evaluating the......

Words: 963 - Pages: 4