September 30, 2008 at 7:22 am · Filed under Accounting Principles
Not only is the retail sector in India seeing a number of new entrants, but also new and interesting formats like home shopping via television channel and online portals (eCommerce). Layaway sales – a popular concept in countries such as the US, the UK and Canada, with big retailers and small-time stores, alike, promoting such sales and attracting customers through this model – is gaining momentum in India and one is likely to hear a lot more of this in the future, says Mr Rajiv Goyal, Director, Ernst & Young India Pvt. Ltd.
The ultimate objective for these retail ventures/concepts is to grab the maximum share of customers’ wallet and the retailers are trying to lure customers to utilise their maximum credit limits. Therefore, retailers are introducing novel schemes – the facility of money-back guarantee, ‘cash on delivery’ with no upfront payment are a couple – to lure customers and create loyalty.
While layaway sales is an interesting concept and may catch the fancy of the consumers in India, there are issues and challenges, especially relating to accounting process for the retailers, cautions Mr Goyal. ‘Revenue Recognition’ is an important accounting issue to be addressed in a layaway sales transaction, he adds, in the course of an email interaction with Business Line.
Since the level and range of subjectivity regarding revenue recognition could lead to different companies coming up with different answers and thereby showing different financial results, Mr Goyal is of the view that the Institute of Chartered Accountants of India (ICAI) should come up with guidance on principles that are to be followed while recognising the revenue under layaway sales transaction.
Excerpts from the interview:
Can you take us through the concept of layaway sales?
Layaway sales refers to merchandise that has been sold on deferred payment and as a result is “laid away’’, i.e., physically separated from stock available for cash sale and is not handed over to the customer until the entire payment has been made.
In this case, the retailer collects upfront deposits from the customer for the sale of goods. Payment plans under layaway sales arrangements range from a specific amount of money to be paid at set intervals or total payments to be completed within a set period of time. It benefits the customer since he has the flexibility to suit his cash flows. Goods are delivered only after the full payment is made. Cancellation and refund policies vary amongst retailers with a specified percentage being deducted by retailers before granting cancellation.
What are the challenges relating to this new concept?
While this concept is catching up in India, ‘revenue recognition’ is an important accounting issue to be addressed in a layaway sales transaction. The retailer still retains the risks of ownership of the merchandise as it has received only a deposit from the customer and does not have an enforceable right to the remainder of the purchase price. Similarly, customers cannot enforce delivery of goods till he has paid the last instalment. Thus, the sale is not complete and revenue recognition becomes uncertain.
We have clear accounting guidance on revenue recognition, don’t we?
As per Accounting Standard (AS) 9 ‘Revenue Recognition’ issued by the ICAI, the primary condition of revenue recognition is transfer of risk and reward from the seller to the buyer.
AS-9 specifies that revenue can be recognised when the ‘seller of goods has transferred to the buyer the property in the goods for a price’ or ‘all significant risks and rewards of ownership have been transferred to the buyer and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods’.
However, AS-9 does not stipulate physical delivery of goods from the seller to the buyer as a fulfilling condition of transfer of risk and reward to recognise revenue.
In a layaway sales transaction, uncertainty over timing of transfer of significant risk and rewards of ownership arises due to the fact that the retailer’s ability to assess ultimate collection of consideration with reasonable certainty is subjective.
Are there specific guidelines relating to handling this uncertainty for accounting purposes?
As per AS-9, to recognise revenue in uncertain circumstances, it should be measurable and, at the time of sale, it would not be unreasonable to expect ultimate collection.
Where the ability to assess the ultimate collection with reasonable certainty is lacking, revenue recognition is postponed to the extent of uncertainty involved. In such cases, it may be appropriate to recognise revenue only when it is reasonably certain that the ultimate collection will be made.
While some retailers may take the above stand and recognise revenue only post delivery of product to the customer, others could argue that, since there is no linkage to actual delivery of goods, revenue can be recognised at the time of entering into a layaway sales transaction based on experience and financial loss to the buyer in case the delivery is not taken; and that they can also make a provision for expected sales return.
What is the likely implication of this scenario?
The level and range of subjectivity available in AS-9 regarding revenue recognition in layaway sales transaction can mean that similar set of circumstances will lead to different companies coming up with different answers, thereby showing different financial results.
So, what is the possible solution?
Since it is not appropriate to recognise revenue at the time of accepting upfront deposit as the primary condition of “transfer of risk & reward” is not fulfilled, the ICAI should come up with guidance on principles that are to be followed while recognising the revenue under layaway sales transaction.
Revenue should be recognised only after physical delivery of merchandise to the buyer on receipt of full payment. Such clarification will bring uniformity and comparability in financials results of companies and will substantiate the meaning of general purpose financial statements.
http://www.hindu.com/thehindu/holnus/006200809241012.htm
September 30, 2008 at 7:15 am · Filed under Accounting Jobs
It is a good thing that it is easier to find Accounting Jobs in Texas as all are available in one site. There is no need to go searching anywhere in the internet that could be tedious, confusing and frustrating. Doing searches were made easier: just type the job title or company or any keyword and voila! the list of available accounting jobs and the job descriptions will appear or choosing can also be done by city. This really saves time and effort. What with the gas prices being so unstable and expensive nowadays, there is no need to incur more. Let a few keystrokes do the driving for you. There is just no need to get some headache just to find work and for sure, my uncle was quite happy using it.
Just early this year, two of my mother’s siblings were finally able to join their two sisters in Texas. After years (actually, it took more than 2 decades) of so much frustration and doing paperworks back and forth as required by the US government, they finally got the go signal and approval. Personally, I was actually starting to doubt if there would be any approval coming at all but finally when almost all of us were giving up, their applications were approved. Of course, we were all ecstatic and happy for them.
They are now adjusting quite well and my niece (an adopted of my aunt) is doing well in her new school. My aunt is trying to decide if she should be teaching again or just be happy with her caregiving job. On the other hand, my uncle is still missing the Philippines and his gay friends, he is currently employed in a hotel but is looking for Accounting Jobs in Texas that will give him higher compensation than his hotel job. He has had some experience in accounting before and he thinks he will do pretty well. He wants to save money as soon as he can as he is planning to start a business in the Philippines.
http://marites1034.bravejournal.com/entry/28414/
September 30, 2008 at 7:12 am · Filed under Accounting Information
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http://www.cheaptextbook.name/core-concepts-of-accounting-information-systems/
September 30, 2008 at 6:53 am · Filed under Accounting Firms
Most of the individuals who have tried their hand at dabbling several business ventures would probably nod their head in affirmation that the hardest part of maintaining a business venture is during the first five years of the business. Most of the business ventures usually fail within the first five years. The reasons for the failure of a business venture could vary from lack of sufficient capital to poor business management.
However, there are some minor differences which help to separate a business venture with poor or dismal performance from the one which is relatively famous for its success and growing trust in its customers. These minor differences appear in the form of through financial knowledge and efficient handling of business resources. In most of the cases, the former business venture is found lacking in these aspects.
This is the reason why small business accounting firms have become immensely popular since they were first introduced. A large number of people prefer to take help of small business accounting firms as compared to working on their business finances on their own. The experts at accounting firms are known for their professionalism and high level of knowledge in almost all the aspects of a business. The skilled professional hired by these small business accounting firms are usually skilled professionals who are qualified CPA’s. The professionals at these accounting firms are armed with the right kind of knowledge which can be used to take an individual’s business to the next level.
Small business accounting firms help an individual to maintain proper business records for their business venture. All the accounts books required for the proper functioning of a business venture are maintained in a proper manner by these individuals.
No matter, how much an individual may lay stress on the need to achieve stable success in their business venture, they wont be able to do so until they are able to identify the key areas where their business may be lacking in terms of efficiency. Most of the individuals agree that one of the major areas in the functioning of business which may lead to troubles are finances and account handling. Business profits and losses are all a matter of numbers. Thus it is extremely necessary for an individual to keep a proper tab on the financial details. In case, they are incompetent to do so or believe that they are not fully qualified for the job, there is a number of small business accounting firms at their aid.
It is equally necessary to hire the services from a well known accounting firm rather than going in for just any random business accounting firm. An entrepreneur must make sure that the small business accounting firm being hired by them is actually good at its work and can help their business to bloom. Small business accounting firms can make or break a business in terms of their finance handling. An inefficient accountant would not prove all that wonderful for the health of the business. Thus, it is important to make the right choices.
Alvis Brazma gives advice to business owners about how to manage their business efficiently without any hassles.To know more about small business accounting firm bookkeeping help, visit www.impacctusa.com
http://www.probloginfos.com/small-business-accounting-firm-everything-you-must-know-about-them/
