CASE STUDY
Instructions
This assignment information should be read in conjunction with the material provided in relation to the lecture for Topic 6: Case Study Development and Communication.
Please note 5.5 of the ECP: Students must submit this assignment to achieve a passing grade in ACCT3102. Failure to submit, even with a mark of more than 50% in the two examinations, will result in a grade of 3.
CONSULTATION IN RELATION TO THE CASE STUDY
To ensure consistency of information, ALL questions relating to the case study must be submitted on the Blackboard Discussion Board - Case Study Thread. Questions will be answered promptly when using this platform. Teaching staff will NOT be answering content related questions in relation to this assessment item in consult or via email. The only exception to this will be during the Case Study Lecture.
Case Study
LIMIT 3 pages (excludes the Reference List)
WEIGHTING 20% (80 marks)
REQUIREMENTS:
You are required to individually prepare business advice to the directors of Grace Games Ltd. The following professional writing protocols have been adopted by your firm for correspondence with all clients:
• All client correspondence is to be 1.5 line spaced on A4 paper with 2.5cm for all margins.
• Font to be used is Times New Roman font size 12.
• All calculations should be rounded to two decimal places.
Important notes:
• Ensure you use the most recent version of AASB 15 Revenue from Contracts with Customers available on Blackboard or from the AASB website.
• Harvard referencing is to be adopted for in-text reference, other than for accounting standards (see note below), and for the reference list.
• For the in-text referencing from the accounting standards, you must cite the specific provisions including paragraph from the relevant AASB. Use this form of referencing: AASB 15:11 or AASB 15, para 11. However, do NOT reproduce significant parts of the regulation as this would not be appropriate when presenting your advice to a client. The focus should be on interpretation and application of the standard, with a concise, well-structured analysis for your client with key referencing to critical elements of the appropriate accounting standards.
• A ‘Formal Report’ structure with an Executive Summary and Table of Contents is NOT required given the brevity of the required information.
• This assessment must be the sole work of the individual student and NOT done in collaboration with other students. Students may discuss with one another the general principles of the Accounting Standards; however, you may not collaborate/discuss on the specifics of the proposal or how the Standards are relevant to the proposal.
Case Study
The following business situation has been presented to your firm for advice.
Grace Games Ltd (Grace) is a company that writes and sells computer games. Grace has just moved to Australia from Delaware (United States). In the past, Grace has used the American ‘free-to-play’ model where players can download and play the game for free, but then purchase virtual goods while in the game. Grace’s games always offer the players to opportunity to purchase durable items such as ‘costumes’ and ‘equipment’, as well as consumable items such as ‘coins’ and ‘seeds’.
Grace has several games in the development stage, and it has just released a new computer gardening levels game. Grace is looking to hire a team of programmers to develop and finalise the company’s new games. It has an appointment with a bank to discuss financing options to fund their expansion.
Before its meeting with the bank, Grace has been trying increase sales by encouraging new players to purchase virtual goods while in the ‘garden’. With a view to attracting new players, Grace has put together an ‘apprentice gardener package’. The terms of this package are:
• After downloading the game for free, new players can make an up-front cash payment of $20 which entitles the player to 10 plants, 5000 seeds and access to 10 exclusive levels of the game. Plants and seeds can be used within the game to purchase additional virtual goods. The $20 is nonrefundable. Grace plans on selling this package for $30 after the promotion period ends.
• In addition, after completing each of the first five exclusive levels, players will receive a ‘complimentary’ garden tools upgrade. These upgrades would normally cost $5 each and are valid for three months after the purchase of the ‘apprentice gardener package’.
• And wait, there’s more! As an added incentive, apprentice gardeners who complete all 10 exclusive levels within 3 months will receive a premium (virtual) ‘gold glove’ for free. Grace’s prior experience with such offers is that 70% of players receive the ‘bonus’ items at the end of the qualifying period. The ‘gold glove’ usually retails in the game store for 5 plants and 1000 seeds, or $15 to purchase through the app store.
Other information from Grace includes:
• Each app store (Apple iTunes, Google Play Store, etc) keeps 20% of any products sold through the platform.
• Their friend, Camila from Havana GAMES Inc, has suggested that Grace should use the ‘item-based revenue model’ (IBRM) to record its revenue because she thinks this will result in more revenue being recorded in a more timely fashion, which will persuade the bank to lend Grace the money it needs.
Grace has come to you before its bank meeting for advice on how it should recognize the revenue from its online game sales.
Required:
You represent the accounting firm advising Grace Games Ltd as to its compliance with AASB 15 Revenue from Contracts with Customers. Comment on all matters relating to the US GAAP versus AASB accounting treatment of the revenue described above, providing clear explanations to support your answers.
Your recommendations should provide a clear explanation of:
a) The accounting treatment of revenue in Australia and the options for recording ‘in-app’ purchases under AASB 15.
b) Whether the IBRM is appropriate for Grace Games Ltd.
c) A clear recommendation of when you think Grace should recognise the revenue from the sale of the ‘apprentice gardener package’.
Case Study Marking Criteria and Rubric
LG 1: Be knowledgeable within field of accounting;
• Analysis AASB Treatments of Revenue: Problem is analysed with integration of relevant research of accounting standards and data.
• Analysis US GAAP Treatment of Revenue: Problem is analysed with integration of relevant research of accounting standards and data.
• Analysis of earnings management issues: Problem is analysed with integration of appropriate theory and potential consequences.
LG 2: Have professional and effective writing skills;
• Structure: Written work is logically sequenced with sound paragraph structure, clear and easy to read.
• Clarity of expression: Writing is free of spelling, punctuation and grammatical errors.
• Research and Referencing: Written work is referenced and demonstrates an ability to undertake independent research.
LG 3: Be creative analytical thinkers
• Identification Problem is identified and discussed within relevant context
• Analysis Revenue Recognition: Problem is analysed with integration of relevant research of accounting standards and data.
• Conclusion & Recommendation: Consequences are considered, discussed, and conclusion reached. Recommendation is proposed and justified.
Case Study Marking Criteria and Rubric
Task Mark
Outstanding
Very Good
Meets Expectations
Below Expectations
Well Below Expectations
Not attempted
Identification
Problem is identified and discussed within relevant context 5 All key concepts clearly identified and summarised appropriately. Most key concepts identified. Only the occasional minor error evident. Identifies some key concepts.
Some minor, and the occasional major, error evident. Few key concepts identified. Major errors evident throughout. Fails to identify key concepts. Little or no evidence of understanding. Not attempted
Analysis AASB Treatment of Revenue
Problem is analysed with integration of relevant research of accounting standards and data. 20 Evidence of full understanding of the relevant accounting standards and application of the case details, demonstrated by correct application of all of the relevant sections of the accounting standards with appropriate supporting details correct. Evidence of full understanding of the relevant accounting standards and application of the case details,
demonstrated by the correct application of most of the relevant sections of the accounting standards with supporting calculations correct. Evidence of sound understanding of the relevant accounting standards and application of the case details,
demonstrated by the correct application of some of the relevant sections of the accounting standards with supporting application mostly correct. Limited evidence of understanding of the relevant accounting standards and application of the case details,
demonstrated by the correct application of few of the relevant sections of the accounting standards. Inappropriate and/or insufficient understanding of the relevant accounting standards and application to the case details. Major errors evident in application. Not attempted
Analysis US GAAP
Treatment of Revenue Problem is analysed with integration of relevant research of accounting standards and data. 5 Evidence of rigorous research of the relevant accounting standards and application of the case details, demonstrated by correct application of all of the relevant sections of the accounting standards. Evidence of rigorous research of the relevant accounting standards and application of the case details,
demonstrated by the correct application of most of the relevant sections of the accounting standards. Evidence of sound research of the relevant accounting standards and application of the case details,
demonstrated by the correct application of some of the relevant sections of the accounting standards. Limited evidence of research of the relevant accounting standards and application of the case details,
demonstrated by the correct application of few of the relevant sections of the accounting standards. Inappropriate and/or insufficient research of the relevant accounting standards and application to the case details. Not attempted
Analysis of earnings management issues: Problem is analysed with integration of appropriate theory and potential consequences. 10 Evidence of full understanding of the relevant accounting theory and application of the case details, demonstrated by correct application/discussion of theory with appropriate supporting details correct. Evidence of full understanding of the relevant accounting standards and application of the case details,
demonstrated by the correct application/discussion of most of the relevant theory with appropriate supporting details correct. Evidence of sound understanding of the relevant accounting standards and application of the case details,
demonstrated by the correct application/discussion of some of the relevant sections of the accounting theory with supporting application mostly correct. Limited evidence of understanding of the relevant accounting standards and application of the case details,
demonstrated by the correct application/discussion of few of the relevant sections of the accounting theory. Inappropriate and/or insufficient understanding of the relevant accounting theory and application to the case details. Major errors evident in application/discussion. Not attempted
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Task Mark
Outstanding
Very Good
Meets Expectations
Below Expectations
Well Below Expectations
Not attempted
Conclusion &
Recommendation Consequences are considered, discussed, and conclusion reached. Recommendation is proposed and justified 10 Conclusion/s clearly demonstrated with all correct decisions and relevant assumptions carried forward from decisions made in previous sections. Proposed solution is comprehensively justified. Highly relevant and correct recommendations drawn, with all relevant assumptions, calculations and evidence considered. Conclusion/s clearly demonstrated with mostly correct assumptions carried forward from decisions made in previous sections. Proposed solutions are well justified. Correct
recommendations drawn, with
useful assumptions, calculations and evidence considered. May have some minor exclusions. Conclusion/s demonstrated with some correct assumptions carried forward from decisions made in previous sections. Some useful solutions proposed. Correct recommendations, with minor errors in consideration and use of assumptions, calculations and/or evidence. Analysis demonstrated but with major problems with assumptions and/or inconsistent with decisions made in previous section. Though not always relevant or justified, some proposed solution/s have been made. Recommendations tend to be incorrect due to major errors in consideration of assumptions, calculations and/or evidence. Analysis not demonstrated with assumptions incorrect. Proposed solutions and justification for these are inappropriate. Incorrect or absent recommendations with little if any reference to relevant assumptions, calculations and evidence. Not attempted
Structure
Written work is logically sequenced with sound paragraph structure, clear and easy to read 10 Written advice is very well structured, logically sequenced and presented in a highly professional manner that clearly communicates the intended advice to the client. Full compliance with page limit and formatting instructions. Written advice is well structured and logically sequenced with only the occasional minor formatting error. Presented in a professional manner that communicates the intended advice to the client.
Compliance with page limit and formatting instructions. Written advice is adequately structured and sequenced, though it occasionally lacks a degree of professionalism (such as minor formatting errors and/or inappropriate use of headings). Provision of advice mostly takes into account the needs of the client. May have some noncompliance with page limit and/or formatting instructions. Written advice is adequately structured in part, though it lacks a degree of professionalism and/or lacks consideration regarding provision of advice suitable for
the needs of a client. There is some non-compliance with page limit and formatting instructions. Presentation and lack of structure detracts from the professionalism of the report. Very little concern regarding provision of advice suitable for the needs of a client. Compliance with page limits and formatting instructions has largely been ignored. Not attempted
Clarity of expression Writing is free of spelling,
punctuation and grammatical errors. 10 Fluent writing style with expression highly suited to set task. Grammar, spelling and punctuation are accurate. Mostly fluent writing style with expression appropriate to set task. Grammar, spelling and punctuation are mostly accurate with only minor errors evident. Writing style sometimes lacks the clarity of expression but meaning is still apparent. Grammar, spelling and/or punctuation contain more persistent errors. Writing style often lacks clarity of expression, which impacts on the readability of your work. There are some serious grammar, spelling and/or punctuation errors which impacts on the readability of some parts of the written advice. Writing style is not suited to the set task. There are numerous grammar, spelling and/or punctuation errors which significantly impacts on the readability of the written advice. Not attempted
Research and Referencing Written work is referenced and demonstrates an ability to undertake independent research. 10 In-text referencing and the reference list are complete and accurate. In-text referencing and the reference list are mostly complete and accurate with one or two minor errors evident in either in-text referencing or reference list. In-text referencing and the reference list are usually complete with several minor errors evident in either in-text referencing or reference list. Some attempt at referencing but details are either missing or contain more frequent errors. Referencing is absent and/or unsystematic and contains more frequent errors. Not attempted
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