Outsourcing Essay

Question 1 Is the story policy proposed by OSI to defer exist associated with the origination of the agreement an appropriate policy? What advice would you give OSI regarding its policy election?Accounting policy proposed by OSI to defer equals is an appropriate policy. woo should be deferred if they create or add value to an asset. In FASB conception Statement No. 6, Par 25 states asset as equiprobable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. In the gaucherie of Outsourcing, management believes all up-front cost incurred atomic number 18 a necessary investment and will generate substantial profits through call revenue, because we could say the cost associated with the draw are part of revenue generating transcription. This arrangement could be consider as an asset because revenue (Set-up and Call revenue) provides a future economic benefit, and this arrangement is controlled by Outsourcing Service s, Inc. Question 2 If the accounting policy to defer costs is appropriate, what costs, if any, would be eligible?Any cost directly relate to the revenue arrangement are considered eligible for postponement. SAB theme 13Af provide descriptions of cost that are eligible for deferral. Eligible cost are in the lesson of Outsourcing are a) $1,500,000 Direct costs to a third gear party to configure OSI The direct cost is incremental direct cost incurred with third parties. (FAS-91 or ASC 605-20-25-4) b) $250,000 Sales Commission allow deferring the cost to a lower place FTB 90-1 because it is associated with the contract. c) $50,000 corporate cost corporate personnel dedicated to contract dialogue is direct loan origination costs, these cost are eligible for deferral under FASB Statement No. 91 or ASC 310-20-25-2. Question 3 If there are costs for which deferral is appropriate, what is the appropriate period everyplace which to defer these costsUtilizing matching principle recog nize deferred cost at the same time as related revenue is recognized. In the case of Outsourcing, they will recognize revenue over the estimated customer life, therefore the costs listed in question 2 are deferred and expensed over the period of 4.3 years. both SAB Topic 13Af, question 4 and SC 605-20-25-4 state acquisition of that contract (incremental direct acquisition costs) shall be deferred and charged to expense in rest to the revenue recognized.