Fares West and Adam East meet at the HHD environmental convention in Istanbul Turkey. Both men work
Question:
Fares West and Adam East meet at the HHD environmental convention in Istanbul Turkey. Both men work for construction companies. Mr. West works for the Florida construction company FCC in the United states. FCC has embarked on constructing an underwater tunnel between Florida and Cuba. Mr. East works for unfa Qatar limited AQL which is currently in the process of building an underwater tunnel. Both projects started in January 2014 due to environmental concerns the projects are expected to take nine years until completion. The two men are the convention to discuss how their respective companies have addressed environmental concerns on their projects.
The following is a conversation that took place between the two men:
Mr.East: Nice to meet you Mr. West I enjoyed your presentation about how your company has this with environmental concerns off cause of Florida. It's interesting that our company has also embarked on a similar project to build a tunnel.
Mr.West: nice to meet you too Mr. East at Florida construction company we pride ourself on putting their valuable first even if it costs us more money and time.
Mr.East: I read your biography information and realized that you were an accountant before taking the role of a project manager. That's interesting as they have accounting breaking ground too.
Mr. West: actually I had the chance to read a summary of your project costs and revenue and you will be surprised to know that they are the same as ours.
Mr. East: That?s interesting that's incredible however I must tell you that we don't use percentage of completion method.
Mr. West: we also don't use the percentage of completion method as well.
Mr. East: our chief accountant has informed me that at the end of the 2016 three years since the start of the project we are making excellent progress as we follow international financial reporting standards the method we use produces higher profit than that which would be produced by the method used by your company.
Mr. West: as you know we use the GAAP method and I think that accounting method that we use for construction contracts has increased our total assets of course in comparison with your method.
The Question for the case is :
Answer the following questions with respect to FCC and AQL companies:
Do you agree with Mr. East?s position that at the end of 2016, his company makes a higher profit from the project when compared to the profit that FCC makes from its project? Provide evidence to support your decision.
Financial Accounting IFRS
ISBN: 978-1118285909
2nd edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso