Assume your starting salary as a young engineer is$65,000. You expect annual raises of 2.5%. You will deposit a constant percentage of your annual salary at the end of each year in a savings account that earns 5%. What percentage must be saved so that there will be$1,000,000 in savings for retirement after 25 years?

1. In Raptor, Prompt for and input a saleswoman’s sales for the month (in dollars) and her commission rate (as a percentage). Output her commission for that month. Note that you will need to convert the percentage to a decimal. You will need the following variables: SalesAmount CommissionRate CommissionEarned You will need the following formula: CommissionEarned = SalesAmount * (CommissionRate/100).

Revenue Recognition: Understanding the Impact of IFRS 15 - Revenue from Contracts with Customers

Rodney Redding       Brent T. McCallum* Abstract

In May 2014, the International Accounting Standards Board issued International Financial Reporting Standard (hereafter IFRS) 15 “Revenue from Contracts with Customers”. The standard replaces the International Accounting Standards (IAS) 18, “Revenue” and IAS 11, “Construction Contracts.” The accounting guidelines under IFRS 15 will become authoritative in 2018. Some companies may not see significant changes in the amount of revenue recognized. However, in certain industries such as telecom, software development, real estate, and some retailers, the effect on revenue recognition timing may be significant. The purpose of this case is to contrast the accounting for a transaction under the present IAS standard for revenue recognition and the guidance to be implemented in 2018. The case is relevant not only for those majoring in accounting but also for majors such as finance that analyze corporate financial statements. The case requires the performance of a web search to obtain details of the guidelines provided in IFRS 15 and a contrasting of the accounting treatment under IAS 18 with the approach required by the new IFRS 15 for a mobile telecommunications company.

Key Words: Revenue Recognition , IFRS 15, “Revenue from Contracts with Customers”, International Financial Reporting Standard 15, telecommunications revenue recognition, telecoms revenue recognition, revenue recognition timing, five-step process for revenue recognition, guidance changes for revenue recognition, identify the contract with the customer, performance obligations, contract price, transaction price, satisfying the performance obligation.

Introduction

In May of 2014, the International Accounting Standards Board issued International Financial Reporting Standard (hereafter IFRS) 15 “Revenue from Contracts with Customers”. The standard replaces the International Accounting Standards (IAS) “Revenue” and “Construction Contracts” as well as several other interpretations dealing with related issues. The accounting guidelines under IFRS 15 were originally intended to become authoritative in 2017 however, following a recent amendment, this has been extended to 2018. IFRS 15 changes the guidelines for timing and amount of revenue recognition for contracts with customers. For many companies these changes will have little financial impact Companies in the telecoms, software development, real estate, and retail sectors may however be significantly impacted by these changes. The core of IFRS 15 is the new five step process for determining the timing and amount of revenue to be recognized which will now be applied to all revenue from contracts with customers.

What Are The Accountants Doing To Our Revenue? The Company

MoServ is a Middle Eastern North African (MENA) telecommunications company that has been in existence since 2011. The company provides mobile phone service to 16 Middle Eastern and African countries. To attract customers they operate similar to their competition by offering low

cost or sometimes free mobile telephones to customers that sign multiyear service contracts. The company has been able to keep initial construction costs to a minimum by signing an agreement with a competitor to use the competitor’s signal towers on a 10 year lease ending in 2022. MoServ has already begun to acquire land in suitable locations for construction of company owned signal towers. Financing of the tower construction will require the company to acquire external funding through debt issuances in 2021. The Treasurer is concerned about the potential impact of the adoption of IFRS 15 on the trading results for the company for the three years 2018 to 2020. The Treasurer has a finance background and needs to know the impact of the new revenue recognition guidelines on reported income in those two years. He requires guidance on the following issues:

• Will the effect lower reported earnings?
• If so, how much compared to earnings determined using IAS 18, the current guidance for revenue recognition?
• Will the amount of any decrease affect the cost of borrowing or perhaps even restrict access to some debt opportunities?

The treasurer has asked the Controller to assign an accounting staff member to report on the new IFRS 15 guidelines to bring the treasury staff up to date on the changes. He also wants to know how the new standard will affect the revenue recognition arrangements on their 2 year New Soltam contract. This is the company’s highest revenue generating transaction and consists of a two year calling contract with a “free” telephone upon contract signing.

Revenue Transaction

MoServ offers a package similar to many of its competitors. Customers that sign up for a multiyear contract for phone usage are provided a phone for free or at cost significantly below the market value of the mobile phone. MoServ’s main contract (that provides 95% of corporate revenue) is as follows:

2 Year New Soltam Contract with Moserv

Length of contract: 24 months Cancellation policy: Non-cancelable

Monthly fee for mobile service: AED 800 (AED: United Arab Emirates currency) Contract signing bonus: New Soltam 398FX6 sophisticated mobile phone

Other information:

Normal selling price of Soltam mobile phone without contract: AED 1800. A 24 month contract with no free mobile phone is 870 AED per month.

The cost to MoSERV for the Soltam 398FX6 is AED 900 per unit.

Specific Instructions and Questions for the Accounting Staff

1. Access one of the websites of one of the Big Four public accounting firms and obtain the firm’s publication on IFRS 15. You are looking for only an Overview of the guidance. The Treasurer only wants an introduction to the guidance not detailed information. Attach a file to your report with this information or publication for review by the Treasurer.
2. Is the new revenue recognition guidance different under IASB and FASB? Or is this a joint project where the guidance is similar?
3. Indicate the IASB standard that is followed currently by MoServ before the adoption of IFRS 15.
4. Show the accounting for the signing of one contract by a customer under the current IASB authoritative guidance, for revenue recognition. Include the accounting at the time of signing the contract and for the first two months of the contract.
5. What is the effective date for the adoption of IFRS 15?
6. Can MoServ adopt IFRS early?
7. List and discuss the five steps of revenue recognition under IFRS 15 as applied to MoServ’s 2 Year New Soltam contract. Include the accounting journal entries at the time of signing the contract and for the first two months of the contract.
8. Write a brief description of the differences in the revenue and expense recognition under the two IASB standards.

Case Study 2 Construction

Fred’s Sheds

Fred Smith, the founder and chief executive of Fred’s Sheds, received a phone call one afternoon from a local farmer, Mr Jones, requesting a quote to design and build a large storage shed on his property. Fred asked Mr Jones what size and type of shed he would like, when he wanted work to commence, and when he wanted it completed.

Mr Jones told him that he required a large shed, big enough to store his tractor and utility vehicle, and spaces for a workbench, tools and fertilisers.  

He also specified that the shed must have power, water and a toilet. He requested that the shed be made of high quality materials, because twice in the previous ten years some of the other sheds on his property had been damaged by inclement weather, costing him many thousands of dollars in repairs.

Mr Jones wanted work to commence in 6 week’s time and would like the job completed no more than 3 weeks after that so he would have a place to store his vehicles before the winter rains came.

Mr Jones asked Fred to come up with a design and quote to build his shed and asked him to present them to him at a meeting at his house in a week’s time.

He told Fred that he was obtaining three quotes from three different builders, and that he would select his preferred builder based on four criteria.

These were quality, the ability to start and finish on time, and cost.

Mr Jones said he would like to spend no more than $40,000 on the shed, but would consider alternate proposals that were a little higher in price if they could exceed his minimum evaluation criteria.

As soon as Fred hung up the phone his mind started to think of all the different tasks he would need to do to win and complete the job. Having built many sheds before, he was confident he had the project management skills to build a shed that met Mr Jones’s extensive criteria. He jotted down some of his thoughts on a notepad so that he would not forget anything.

First of all, Fred knew he would have to come up with a winning design, so he would need to put his designer, Karen, on the job of coming up with some innovative designs.

Fred would also have to source higher quality building materials than he usually used because, although Fred always used good materials, he thought he would try to use the best possible materials, if it was cost effective, to give him the edge in meeting Mr Jones’s stringent evaluation criteria over his two competitors.

Fred also knew that he would need to plan the human resources necessary to complete the job in the timeframe required. Some of his other construction projects were nearing completion, so it would not be too much of a problem getting some of his construction workers to start in 6 weeks’ time. However, Fred was not sure about the availability of his subcontractors, Eddie the electrician, Bob the plumber, Gary the glazier and Tony his fencing contractor and odd job man, because business was booming and they were all very busy.

If he was successful in winning the contract, Fred knew that there would still be lots of work to be done. After signing the contract, he would need to submit a Development Application and construction certificate to the local council and await their approval.

Mr Jones’s final selections for colour and style of shed materials would need to be finalised and a deposit received prior to commencing work.

Once all that had been accomplished, Fred and his team of four would have to prepare the site for construction. This would involve performing underground cable service checks, and perhaps contracting a surveyor to locate existing boundaries as the shed was going to be built close to the boundary with Mrs Mitchell’s neighbouring property.

The site would need to be cleared, temporary site facilities such as a toilet, site fencing, power and water would have to be established, the site set out and the formwork built. Following this, the site would be excavated.

While the excavation was taking place, Fred would need to remember to book a council inspection for the formwork prior to concreting, as well as booking the concrete truck, a date for the shed to be delivered, a date for the shed installation team to put the shed into place, and dates for his subcontractors to come and install power and water.

After pouring the concrete and finish, his team would need to strip the formwork. At this time Fred could invoice Mr Jones for a progress payment as this represented a milestone in the project. Following this the shed could be delivered and installed,

Eddie the electrician could be called in to connect the mains power, Bob the plumber could connect the water and install the toilet and Gary the glazier could install the windows. While they were busy doing that, Fred and his team could start clearing the site, removing any rubbish and the temporary site amenities.

Once all these tasks were accomplished, the job would be at practical completion. Fred would then meet with Mr Jones, present him with a final bill and handover the keys to the shed. Fred smiled to himself feeling confident that he would beat his two competitors to the job and thinking that he would soon have another satisfied customer.

Complete the project budget in the resources and cost template.

******** I need just a simple example

Resource and Cost Template

The price of risk measures how risk and return can be traded off in making portfolio choices. Assume that the standard deviation of a risky asset is 2.00% (and does not change) with a return of 8.00%. You also have the choice to invest in a risk-free asset with return 4.00%.

If the risk-free return increases by 1.00 percentage points and the risky asset return increases by 7.00 percentage points, what is the change in the price of risk (in percentage points)?     (Round to two decimals, if necessary.)

HINT: Recall that the price of risk is the difference in returns from a risky asset compared to a risk-free asset relative to the standard deviation of the risky asset.

IQ test scores are normally distributed with a mean of 100 and a standard deviation of 15. An individual's IQ score is found to be 123.

A.What percentage of individuals will score above 123?

B.What percentage of individuals will score below 123?

c. What percentage of individuals will score between 123 and 100?

d. This individual was trying to be in the 80th percentile; did they achieve this? how can you tell?

e. what can we say about someone with a z score of -1.61? How many will score above? below? what is their IQ score?

f. what IQ score(s) will encompass the middle 39%?

1. In a normal population of IQ scores, what percent of people have “average” IQ’s?

Answer __68%

2. In a normal distribution, what percentage of people would be located at or below 2 standard deviations from the mean?

Answer _______70

3. Answer the following questions based on a distribution with a μ = 30 and σ = 5: ( don’t get this question )

1. What range of scores is considered “average”? ____________ to ______________

2. What percentage of people has an average score? __________________________

3. What percentage of people has extremely high or extremely low scores? _________

4. What range of scores (requires numbers to be noted in the blank spaces) have the highest probability of being selected? ____1______ to ___30______

A bond has four years to maturity, an 8% annual coupon and a par value of $100. The bond pays a continuously compounded interest of 5%.

a. What would the actual percentage change in the price of the bond be if the interest rate goes up from 5% to 6%?

b. What would be the percentage change in the price of the bond implied by the duration approximation?

c. What would be the percentage change in the price of the bond implied by the duration plus convexity approximation?

d. Why does adding the convexity term to the approximation improve it?

Please do not use excell tables or excell formulas. Our answers must handwritten. Thank you.

Scenario 5

A company has a portfolio of investments in stocks and in bonds. The total investment is $8 million of which $2 million is invested in stocks. (Go to four decimals as needed.)

What is the portfolio weight for the bonds?                                                

Question 22

Refer to Scenario 5.

What is the expected portfolio return? Calculate as a percentage.

Question 23

Refer to Scenario 5.

What is the variance of the portfolio return? Calculate as a percentage.

Question 24

Refer to Scenario 5.

What is the standard deviation of the portfolio return? Calculate as a percentage.

In a study of government financial aid for college​ students, it becomes necessary to estimate the percentage of​ full-time college students who earn a​ bachelor's degree in four years or less. Find the sample size needed to estimate that percentage. Use a 0.04 margin of error and use a confidence level of 90​%.

Complete parts​ (a) through​ (b) below.

a. Assume that nothing is known about the percentage to be estimated.

n= _____

​(Round up to the nearest​ integer.)

b. Assume prior studies have shown that about 40​% of​ full-time students earn​ bachelor's degrees in four years or less.

n= _____

​(Round up to the nearest​ integer.)