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
Replies (6)
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I'd spread it over the contract period but I'd always have materiality in mind.
Amortised the prepayment of 560k over 36k months?
Amortised the prepayment of 540k over 36k months? No need to record the 60k anywhere?
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
I’d just go 540/36.
Release over 36 months and it doesn’t matter when you pay it.