We are would like to buy our first small business. The seller said that he is "open to an earn out." The company is a subchapter C corporation, but this issue came up in another deal where the business was organized as a California limited liability company (LLC). I would appreciate a business and finance explanation of an earn, not a legal description.

accounting contracts acquisition

asked by Idona

We are working on an acquisition. My boss wants me to calculate the Return on Invested Capital (ROIC) for the target company. She does not want me to calculate our Return on Investment ROI for the acquisition. I think she wants me to measure the effectiveness of their internal capital investments. I am not sure how to calculate return on invested capital.

accounting financial-model finance

asked by boris89

The contract is a 3 year contract with 3 one-year automatic renewals - payment for a full year due at the beginning of each year of the contract. The renewal periods can be canceled with no penalty upon notice from the customer at least 30 days before the renewal period begins.

revenue-recognition accounting

asked by sloane5

More particularly, when is IFRS used for accounting guidance and when is GAAP used? What are the regulatory implications?

accounting compliance gaap ifrs

asked by chancellor23

We have an internal software development team. They develop new products, but they also maintain existing products. What costs get capitalized? Does all development for new products get capitalized? Is there any discretion. For example, if the product is an add-on to an existing solution, does that matter. We would prefer to take the expense in the current year to reduce taxable income, but I'm not sure if that is permitted. What about the maintenance work? Is software maintenance work (done by the same people) always an expense? Under what circumstances would it be capitalized? I need to know the GAAP treatment.

accounting software-development gaap

asked by boris89

I am reviewing financial projects from a technology start up. They show the gross profit margin as high as 118%. In some years it is less than 100%. Is there any circumstance that gross profit margin would exceed 100%?

accounting financial-model

asked by guy79

I am doing a research paper on ExxonMobil and the methods their managers use for product costing. On ExxonMobil's SEC filings, they use Absorption costing because it is mandated by the government. What I am interested in is what costing methods they use for their product costing. Some of those that we are studying are Activity Based Costing (ABC), Relevant Costing, or Standard Costing. Any advice will be appreciated.

accounting cost-accounting

asked by sbhealey

We provide services to customers using a product sold by a company we are partnering with. We negotiated a contract where we provide those services at a reduce rate and the company pays us a royalty on sales of the product as compensation for the reduced service rate. Our auditors have told us that the income we receive from these royalty payments is taxable as ordinary income rather than at the lower tax rate for royalties, but we are struggling to understand why.

accounting contracts tax income-tax royalty

asked by Montana23

Selling annual software subscriptions. Customer pays full year upfront - subscription revenue recognized ratably over the year. Sales rep gets paid within 30 days after customer payment received.

accounting commissions

asked by clark31