You seem to have missed my attempted analogy Grant. I know BHP...

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Mightyatom

3,147 Posts.

05/11/15

16:05

Post #: 16333395
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Originally posted by Grant62 ↑

No they don't. Look at BHP. AR15, p268 (recognition of sales revenue). They do not count production or inventories as part of revenue. For them, revenue arises when there has been "a transfer of risks and rewards to the customer".

Net movement in WIP is a throwback to the old mechanism by which partners in firm partnerships would go and increase their drawings in advance of the matters actually being invoiced and paid for. By pointing to such things as movement in WIP, they were able to persuade their bankers of an enlarged asset sitting on their balance sheet so therefore were tapping into this.

Partnership firms still typically do this. PI firms have long done this particularly those for whom the PI work has been the mainstay of their operations. Incorporated practices tend not to do this. Large national /global partnerships also tend not to do this due to how the partnerships are typically structured and remunerated these days. Some firms actually count as revenue only the fees that they have actually invoiced out and even then only on the basis of definite invoicing (ie: near to certainty re: collectability).

Again, some firms include in their revenue stream all that they charge out, including disbursements. others don't. What does SGH do? Note, in AR15, fee revenue for the year was $486M. Receivables were $700M of which $297M (net) was for trade debtors and $397M (net) was for disbursements.

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You seem to have missed my attempted analogy Grant. I know BHP don't record earnings that are not invoiced. This was in the context of forecasting guidance. The estimate of WIP is no different than BHP estimating what their earning will be for the purposed elf guidance.

Regarding AASB15, we'll leave it to the experts. If WIP is low that means the authorities are satisfied the customer has received benefit that cannot be repeated - a transfer of value. If that is not allowed under AASB15 we will see in th half yearly. You and I know it is allowed and will be reported.

SGH Price at posting: $2.62 Sentiment: Buy Disclosure: Held
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