Case Study: 

 

Global Net Ltd is an internet service provider in Australia which employs staff located overseas to man its call centres. It has been operating in the business for three years. Competition in this industry is intense and Global is about to issue more shares in the following two years. The following ideas have been suggested for action for the current year (ending 30 June):

a. Record executive year-end bonus compensation for the current year when it is paid in the next year, after the June financial year-end.
b. Move the call centres to cheaper and older rental premises outside of the city centre.
c. Sell off equipment before year-end. The proceeds from the sale will be recorded as service revenue and the carrying amount as expenses. The equipment could be replaced with leased equipment in the current year if required.
d. Record the cash received from new customers in June as service revenue for the current year. The plans will be effective from 1 July of the next financial year.

 

Based on the above case study, assume that you are a trainee accountant, recently employed by the company, prepare a report to the Chief Executive Officer containing the following in one thousand three hundred words:

• .Introduction:
  ▪ Briefly state the business involved- remember that this is a fictitious company, and the information is contained in the case.
  ▪ Identify possible overall motivations for the suggestions.
  ▪ Identify relevant frameworks, standards you will use to analyse and solve each item (a) to (d). Briefly list these and any relevant law referred to in your analysis.
• .Analysis of suggestions:
  ▪ Have a subheading for each of the suggestion labelled (a) to (d). Please do not repeat the description of each suggestion given in the case.
  ▪ Under each suggestion, specify the impact of the suggestion on the financial statement elements. Journal entries are not required. If there is no financial impact, please state so.
• .In the analysis:
  o Identify the specifics of framework/ standard/ code to be applied.
  o Briefly explain the accounting concept/ principle etc, the first time it is referred to in your analysis.
   
• .Show logically how you apply the concept/principle to the suggestion.
• .In the conclusion, assess whether there is any violation, followed by recommendation to accept the suggestion or not.
• .state appropriate accounting treatment, if applicable.
• .if no violation of accounting concepts, please state so.
• .comment on any business implications e.g., health and safety, staff welfare, social implications, ethical etc. and give the appropriate recommendation.
   
• .General Conclusion and recommendations
  ▪ Following the discussion of all items, you may like to include a general conclusion, by stating which suggestions are acceptable or otherwise, any additional information required.
  ▪ Broad consequence to the business and offer recommendations on general action to undertake to strengthen for example, corporate governance, legal framework, human resources, sustainability, management strategy and other business operations issues.
  
   
• .Back matter
  ▪ Reference list
   
• .Appendix

Summarise the accounting policies and various amounts from financial statements of the selected company using the table below:

Company Name	Revenue recognition policy and amount reported (Use the predominant policy related to sales of goods or rendition of services)	Inventory policy (Total inventory Reported)	Policy for (a) and (b) Including depreciation/ amortisation policy on   a. Property, plant & equipment, and b. intangible assets (if any) State net carrying value for each class of non-current assets (a) & (b)

 

Answer rating: 100% (QA)

Introduction Global Net Ltd is an internet service provider in Australia that employs staff located overseas to man its call centres The company has been operating for three years and is about to issu... View the full answer