Hoyle Part1 - whether or not the product is developed to...

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CPA Partner: Our company, Simons Software, has recently entered into a contract with Young Manufacturing, a small company who’s engineers are developing a program that we believe will be vital to the growth of our company. We would like to help Young Manufacturing with this development so that once the program is perfected, we can then purchase it for our own use. The contract states that we will provide compensation for the hiring and payment of all employees and overhead business costs for the department responsible for this specific program. This compensation is based solely on the “good faith efforts” of Young Manufacturing and will be paid regardless of
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Unformatted text preview: whether or not the product is developed to our specifications. Simons Software has no equity in Young however the contract does give us a seat on their board of directors. The problem we face is how to properly disclose this contract on our financial statements. How should we handle this contract and would this be considered a Variable Interest Entity? We appreciate your opinion on this matter. Please respond promptly and thank you for your time. Natalie Simons Financial Controller...
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