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Up front cash payment for discount

Upfront cash payment for discount

Maintenance contract - 3 years £200k per year.

accounting treatment - prepaid each instalment (annual payments up front)and release strightline each month - matching principle.

Q) If there was a condition in the contract where if you paid upfront for 3 years you would receive a 10% discount, how does this impact the accounting treatment. Or would you simply just prepay £540k and release over 36 mths. Are there any accounting standards I should be looking into/thinking of ?

many thanks 

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11th Oct 2018 15:37

I'd spread it over the contract period but I'd always have materiality in mind.

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to lionofludesch
11th Oct 2018 19:11

Amortised the prepayment of 560k over 36k months?

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to lionofludesch
11th Oct 2018 19:12

Amortised the prepayment of 540k over 36k months? No need to record the 60k anywhere?

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By DJKL
11th Oct 2018 16:00

FRS102 re Financial Instruments might be worth a read, it mentions sales with deferred payment but does not mention purchases with advanced payments, as far as I could spot ( chapter 11.13)

This is not something I have really looked at, and could well be irrelevant, but there are strange things within FRS102 beyond my experience.

https://www.frc.org.uk/getattachment/69f7d814-c806-4ccc-b451-aba50d6e8de...(March-2018).pdf

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11th Oct 2018 17:44

I’d just go 540/36.

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24th Oct 2018 18:38

Release over 36 months and it doesn’t matter when you pay it.

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