My company is due to provide a service to a start up company who is offering shares as the mode of payment (for cash flow reasons). Using FRS 102, section 26 as a guide, it is my understanding that I need to report this as income in the P&L and an investment in the balance sheet at the fair value of the services (where this is unavailable the alternative is the market value of the shares).
First question is, is my interpretation right?
Second question, what is the subsequent measurement of my investment. I.e. will this be stated as the fair value of services rendered on my balance sheet or comparing carrying value with the market value of shares and difference recognised in P&L?
Third question, vat implication- the service is vatable so my thoughts are invoice will be vat inclusive. Will the carrying value on the balance sheet be stated inclusive of vat? If no, what is the journal entry here?
Fourth question- tax- in the first year of income, corporation tax is payable. If there is an annual adjustment to the P&L (see subsequent measurement above), a deferred tax arises, right? If the company eventually sells the shares at a gain, a capital gains tax arises?
Lastly, the LLP is regulated, my thoughts are, report on the credit risk of this equity instrument? Any thing else I should put on my radar?