Introduction and the Framework



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Siemens AG

  • Siemens AG
  • http://w1.siemens.com/annual/07/pool/download/pdf_finanzinfo/e07_03_financial_statements.pdf
  • Statement of income page 01 of 118
  • Statement of fin’l position page 03 of 118
  • Accounting policy note page 20 of 118
  • Inventory note page 42 of 118
  • Looking Ahead
  • There is nothing on the IASB’s current agenda that directly involves potential changes to IAS 2 Inventories
  • 7-1 The following costs have been incurred by a manufacturer of small leather goods:
  • Hides of various leather
  • Dyes to color the leather
  • Warehouse costs to store the dyed leather while drying
  • Patterns and dies used to guide the cutting of the pieces into the desired shape
  • The salary of the plant manager’s administrative assistant
  • Costs of the warehouse to store finished goods
  • Under-applied factory overhead
  • Instructions
  • Determine whether the cost of each of the above items is included in the cost of inventory. Provide a brief explanation of your answer for each.
  • End-of-Chapter Practice
  • End-of-Chapter Practice
  • End-of-Chapter Practice
  • End-of-Chapter Practice
  • Copyright © 2010 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Inc., 111 River Street, Hoboken, NJ 07030-5774, (201) 748-6011, fax (201) 748-6008, website http://www.wiley.com/go/permissions. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein.
  • Construction Contracts: IAS 11
  • Wiecek and Young
  • IFRS Primer
  • Chapter 8

Related standards

  • Construction Contracts
  • Related standards
  • IAS 11
  • Current GAAP comparisons
  • IFRS financial statement disclosures
  • Looking ahead
  • End-of-chapter practice
  • SAB 104 Revenue Recognition
  • SOP 81-1 Accounting for Performance of Construction-Type and Certain Production-Type Contracts
  • CON 6 Elements of Financial Statements
  • Related Standards
  • IAS 18 Revenue

Objective and scope

  • Objective and scope
  • Combining and segmenting construction contracts
  • Contract revenue
  • Contract costs
  • Recognition of contract revenue and expenses
  • Disclosure and presentation

Standard deals with revenue recognition for construction contracts and the special problems embedded in these contracts due to the nature of the arrangement with the customer

  • Standard deals with revenue recognition for construction contracts and the special problems embedded in these contracts due to the nature of the arrangement with the customer
  • Specifically, these types of contracts often have the following unique features:
    • • Signed up front before work is performed
    • • Customer billings are stipulated in the contract
    • • Long term in nature, spanning several reporting periods
    • • Earnings process is made up of many (often significant) events
  • IAS 11 builds upon the revenue recognition criteria laid down in the framework and also upon IAS 18 Revenue

The standard provides the following term definitions:

  • IAS 11 – Objective and Scope
  • The standard provides the following term definitions:
  • A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use
  • A fixed price contract is a construction contract in which the contractor agrees to a fixed contract price, or a fixed rate per unit of output, which in some cases is subject to cost escalation clauses
  • A cost plus contract is a construction contract in which the contractor is reimbursed for allowable or otherwise defined costs, plus a percentage of these costs or a fixed fee

There may be a need to group or subdivide contracts for accounting purposes and this would depend on how the contract was negotiated

  • IAS 11 – Combining and Segmenting Construction Contracts
  • There may be a need to group or subdivide contracts for accounting purposes and this would depend on how the contract was negotiated
  • Contracts for construction of several assets would be grouped for accounting purposes if the contracts were:
    • • Negotiated together
    • • Closely interrelated, and
    • • Performed concurrently or in continuous sequence


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