Global Perspective Case - Spring 2017
Florida Construction Company (FCC) and Anfaak Qatar Limited (AQL) had the following information:
|
|
Costs incurred during each year
|
Estimated costs to complete
|
Progress billing during the year
|
Cash collected during the year
|
|
2014
|
1,625,000
|
5,200,000
|
3,375,000
|
2,875,000
|
|
2015
|
600,000
|
4,700,000
|
1,562,500
|
1,875,000
|
|
2016
|
962,500
|
4,250,000
|
2,125,000
|
2,125,000
|
|
2017
|
1,312,500
|
3,180,000
|
1,418,750
|
1,375,000
|
|
2018
|
1,125,000
|
2,090,000
|
1,518,750
|
1,750,000
|
|
2019
|
953,125
|
1,230,000
|
1,877,344
|
1,656,250
|
|
2020
|
440,625
|
780,000
|
971,094
|
1,156,250
|
|
2021
|
621,875
|
450,000
|
1,252,344
|
1,281,250
|
|
2022
|
796,875
|
0
|
899,218
|
906,250
|
Required:
1. Discuss some of the challenges that face accountants worldwide when conducting international transactions.
2. Discuss the major difference between GAAP and IFRS.
3. Discuss how the accounting for construction contracts is different under GAAP and IFRS
4. Answer the following questions with respect to FCC and AQL companies:
a) Do you agree with Mr. East's position that at the end of 2016, his company makes a higher profit from the project when compared to the profit that FCC makes from its project? Provide evidence to support your decision.
b) Do you agree with Mr. West's position that at the end of 2016, his company increased its total assets from the project when compared to the method used by AQL (please focus only on Construction in progress and Billings on construction contracts)? Provide evidence to support your decision.
c) Assume that the percentage of completion method was available to AQL at the start of the project in 2014. Assume the company compares its current method with the percentage of completion method. Based on the results at the end of 2016 and 2021, which of the two methods provides:
- Lowest expenses.
- Highest net income
- Highest total assets (please focus only on Construction in progress and Billings on construction contracts).