Everything You Must Know About Accounting for IT Business
Everything You Must Know About Accounting for IT Business
Dubai’s IT sector is constantly expanding. By hiring a lot of techies from all over the world, Dubai’s IT companies are already having a significant impact on the world stage. In order to boost the participation of information technology companies worldwide, Dubai is concentrating on organizing several international technical events.
The primary draw for software companies that were previously solely involved in the sale of software items is the Software-as-a-Service (SaaS) business model. What about the accounting procedures, though? There are several areas in which software businesses need to be knowledgeable in order to build confidence with investors, even if many of the accounting and tax problems they confront are also prevalent in other industries.
For the software sector, IFRS 15
The software industry is finding it difficult to adopt IFRS 15, as was to be expected. Several new decisions and estimations will need to be made by management, even if the revenue recognition pattern remains mostly unchanged. Software agreements frequently contain contract deliverables that have not yet been billed (such as upcoming maintenance periods). These must be declared in accordance with IFRS 15, along with a description of accrued and deferred revenue (contract obligations and contract assets) and the duration of the services that have been or will be rendered.
According to IAS 1, entities must reveal specific details regarding important estimates and judgments. Although management may believe that the estimates and decisions taken in the implementation of IFRS 15 lead to accounting that is comparable to that of prior GAAP, the reasoning behind this conclusion is probably different.
Accounting-Friendly Revenue Recognition in 5 Easy Steps
- Determine the customer’s contract: A written contract is not required for this. The terms and conditions that clients accept when they join up may indicate this or it may be a verbal agreement.
- Determine each of the contract’s distinct performance requirements: A performance obligation is a unique service that is distinct from other commodities or services in the contract and that the client can utilize alone or in conjunction with other services.
- Ascertain the cost of the transaction: How much should be received for the full service?
- Distribution of the purchase price across all performance commitments: For every performance obligation in the contract, estimates of stand-alone selling prices must be generated.
- Acknowledge income as soon as the business meets: Over time, revenue is recorded for every performance obligation.
VAT charges
Since charging VAT is not always required in the United Arab Emirates, it is crucial to know when to do so. Every sale should include VAT, but don’t always collect it from every consumer.
Basically, there are two aspects to consider:
- Where is your client located?
- Is this a business-to-business or business-to-customer transaction?
Our VAT specialists at IBR GROUP ACCOUNTANTS are always happy to help with any additional questions or explanations regarding the information above.
IBR GROUP ACCOUNTANTS: Why Choose Them?
A group of highly qualified, effective, and seasoned specialists at IBR GROUP ACCOUNTANTS can help you stay on top of your company’s finances and keep you updated on its financial reports. Considering the present and future conditions, establishing IT companies or enterprises can be a lucrative choice.
Please get in touch with us in any of these situations; we would be happy to assist! Any IT business issue can be discussed with IBR GROUP ACCOUNTANTS at any time. You can schedule a free one-hour consultation with our specialists. Experts from IBR GROUP ACCOUNTANTS are among the top catalysts in the fields of accounting and auditing, due diligence, tax consultation, business consulting, and CFO services.