The value of a contract to communicate
Article Abstract:
A debate currently exists on how the mobile phone industry should approach accounting for their their subscriber bases, which are an aggregation of individual service contracts. The contracts are of value to the companies and constitute intangible assets. The costs associated with obtaining contracts should be recorded consistently and should be capitalized according to normal Companies Act rules. Incentives offered to gain a contract should be considered part of the costs of obtaining a contract. Capitalized cost figures must be amortized systematically over the useful economic life of the asset: thus, the contract should be amortized over the remaining period of the contract. One can use either valuation of intangible assets or the inclusion of the valuation in the balance sheet: an asset valuation in terms of the stream of future income is relatively straightforward.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1990
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Are the new standards working?
Article Abstract:
Financial Reporting Standard No. 6 (FRS 6) sets out when goodwill should be calculated while FRS 7 discusses how to conduct the calculation. FRS 6, 'Acquisitions and Mergers,' limits the use of merger accounting to group reorganizations and to combinations between parties coming into unison on equal footing. In addition, it requires merger accounting if the combination satisfies certain criteria. The most interesting aspects of FRS 6 are its definition of the previously-undefined group reconstruction and the volume of disclosure that it requires. FRS 7, 'Fair Values in Acquisition Accounting,' breaks from traditional procedures by excluding from fair value acquirers' intention, impairments resulting from post-acquisition events and provisions for future operating losses or for reorganization costs. It remains to be seen how users will accept these two standards.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1995
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Off-balance sheet finance - why all the fuss?
Article Abstract:
The debate over the use of off-balance sheet financing between lawyers and accountants in the UK is not simply another accounting treatment problem, but rather an issue that casts doubt on the entire purpose of communicating a company's financial position and results. The accountants' position on off-balance sheet financing, and a critique of the lawyers' position, is illustrated by way of a hypothetical case study of a company that uses off-balance sheet finance.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1987
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