13 December 2011
ABC Co had some balance in retention money held for more than 3 years. company has taken a decision to recognise it as income. after an year, the retention money had to be paid to the client.
Pls advise on how to treat the above transaction in current year
14 December 2011
Poonam, I look at like this. There was a misinterpretation of fact last year when it was decided that the liability extinguished when we recorded the income. The fact is discovered in the current year when the liability is reinstated. I think this is a prior period item when we bring the liability by booking an expense. This is relevant only if the amount involved is material, otherwise don't bother. :)
CAclubindia
