Recent Question/Assignment

The University of Adelaide
Business School
DUE DATE 6.00 pm on Tuesday 22 September 2015
Method of submission: an electronic copy via Turnitin. Submission instructions for Turnitin are provided separately.
1300 words maximum – reports materially exceeding this length will NOT be accepted. Suggested length for each part is provided as a guide only. The word limit is applied in aggregate only and not to individual components. E.g., the suggested length for part b) is “up to 100 words” but there is no penalty for exceeding 100 words for this part, provided that the entire assignment is within the maximum of 1300 words.
Words in tables are included in the word count.
The reference list is not included in the word count.
Reports must be typed and double-spaced. Single-spacing is permitted within any tables that you wish to use to present your answer.
The use of other authors’ material in your assignment MUST be properly acknowledged and referenced using the Harvard system.
The assignment may be completed individually or in groups of up to three people. The following penalties apply to oversized groups:
Four people - penalty of 25% of the maximum mark applies to all members
Five people - penalty of 50% of the maximum mark applies to all members
Six people - penalty of 75% of the maximum mark applies to all members
More than six people – no marks will be awarded
A forum has been placed on MyUni for questions regarding the assignment. Please post any questions you have to that forum so that the responses provided by staff are accessible to all students in the course. Tutors will NOT discuss the assignment with you during consultations or tutorials.
This assignment counts towards 18% of your final overall grade.
Easy Telecommunications Ltd (ET) developed a two-year prepaid telephone plan in order to target families with older children. The two-year prepaid plan, which is called ET Phone Home, combines a land-line (i.e., a fixed-line) telephone service with a mobile telephone service. For a fixed, nonrefundable price of $790 customers receive the following:
Features of ET
Phone- Home
(contract ) Information pertaining to the value of each feature
Installation and activation of land-line connection This is necessary so that the land-line phone can work at the customer’s place of residence. ET charges a fee of
$190 for this service to casual customers (those not on a 2-year plan) and to customers who relocate.
Land-line handset (fixed-line) This is a telephone that is not mobile. ET sells land-line handsets for $110 each. Used ET handsets sell on E-Bay for approximately $55.
Mobile phone handset The model of mobile phone included in ET Phone Home is sold separately for $40.
Prepaid mobile phone service: 2,000 minutes, expires after 2 years This can be recharged for a further 1,000 minutes over a period of one year for $200.
600 minutes of free mobile-phone-tofamily-land-line calls; expires after 2 years Available with ET Phone Home only; the mobile phone account may be recharged for 300 minutes of mobilephone-to-family-land-line calls for one year for $60.
Additional mobile phones Additional mobile phones can be added to the plan for $490, including 2,000 minutes of prepaid mobile calls and 600 minutes of free mobile-phone-to-family-land-line calls, expiring after 2 years.
• The consideration of $790 is paid by the customer at the commencement of the ET Phone Home contract. At this time the mobile phone and land-line handsets are delivered to the customer.
• Installation and activation of the land-line connection will normally take place within two weeks of the commencement of the contract.
ET is ready to launch ET Phone Home and management has requested a report on its financial reporting implications. The marketing manager has suggested that all of the $790 should be recognised as revenue when ET enters into a contract with a customer. She claims this is valid because the $790 payment is not refundable.
Other information
• Assume all amounts referred to in the case data are material to ET’s financial statements.
• ET plans to adopt AASB 15 in the preparation of its next set of financial statements if its application is consistent with the Conceptual Framework.
• You are not required to consider the accounting treatment for any expenses arising from the ET Phone Home contracts for this assignment.
Required [weighting of each question is shown as %]
a) Describe the key accounting issue(s) arising from the ET Phone Home contract. (up to 50 words) [6%]
b) Describe two principles from the Conceptual Framework that are relevant to this case. (up to 100 words) [14%]
c) In this part you are required to propose a policy to account for the proceeds from entering into ET Phone Home contracts with customers. Your policy should be different form the marketing manager’s policy. Your policy
should be consistent with AASB 15. You do not need to consider the disclosure component of the policy. (up to 600 words)
In your response [40%]:
i) clearly describe your policy ii) explain how it complied with AASB 15 by going through steps 2 to 5 of the approach adopted in that Standard.
d) Based on the two principles identified in part b), evaluate (up to 300 words) [30%]:
i) the accounting policy proposed by the marketing manager’s
ii) the policy that you proposed in part c) i)
e) 1/4/2015 ET entered into an ET Phone Home contract. ET received $790 and the mobile and land-line handsets were delivered to the customer.
5/4/2015 the land-line connection was installed and activated.
By 30 June 2015, the end of ET’s reporting period, the customer had consumed 200 minutes of pre-paid mobile phone calls and 120 minutes of the mobile-phone-to-family-land-line calls.
Analyse the effect of applying your accounting policy (per part c) to account for the ET Phone Home contract on the elements of ET’s financial statements (i.e., effects on assets, liabilities, income etc.) at 30 June 2015. Show workings. (It may be useful to present your answer as a transaction analysis, as shown in lectures – refer topic 3). (up to 20 words) [10%]
Suggested References:
AASB (Australian Accounting Standards Board) 2009, ‘Framework for the Preparation and Presentation of Financial Statements, AASB,
Melbourne in Financial reporting handbook 2015, ed. C Locke, Chartered Accountants Australia and New Zealand, John Wiley and Sons Ltd, Queensland, pp. 10-30.
_____2013, CF 2013-1 Amendments to the Australian Conceptual Framework, AASB, Melbourne in Financial reporting handbook 2015, ed. C Locke, Chartered Accountants Australia and New Zealand, John Wiley and Sons Ltd, Queensland, pp. 30-42.
AASB (Australian Accounting Standards Board) 2014, AASB 15 Revenue from Contracts with Customers, AASB, Melbourne, viewed 7 September 2015,
IAS Plus, 2015, Summary of IFRS 15, Deloitte, viewed 7 September 2015,