Contemporary Issues in Accounting
2013
Assignment 2 – major report

Weighting: 25 %
Length: approximately 2,500 words (max 2,750)
Topic: Definition, recognition and measurement of Virtual assets
This assignment may be completed in groups of up to 3 students. Groups are not compulsory and
students are welcome to make individual submissions. Group assignments can be very effective
and often achieve a higher mark than individual submissions – but equally, there are often
problems within groups. Please consider carefully your responsibilities if you choose to work with
other students in a group – all members are ultimately responsible for the final assignment and
will receive the same mark.

Topic:
While the accounting profession and regulators still struggle with determining a single measurement
regime are whole new class of assets has developed-particularly since around the beginning of this
century. We are all familiar with physical assets and with most types of intangible assets but virtual
assets are the latest items with which the profession needs to contend.
Virtual assets arise most commonly from the virtual economy which exists in a virtual world online.
Participants in the game Second Life for instance are required to purchase Linden dollars in order to
undertake transactions within that world. So real money is being used to purchase virtual goods in
these worlds but these goods do not cease to exist when the player ceases playing the game and
Linden dollars can be exchanged for real money by selling them to another player.
Virtual assets do not consist only of those we find with in online games however. Virtual assets also
include electronic data stored on a computer or the Internet, such as digital photos, domain names
and Internet bank accounts. There are increasing concerns about how people deal with such assets
in terms of their estate planning (in other words, what happens to these items when we die?) and
taxation authorities are becoming increasingly interested in the issue as well.
Just to confuse things, we now have the situation where some real-world companies are offering
transaction within the virtual world-that is, it is possible to undertake purchases and other
transactions with real companies for real goods within some Internet games.
The attached article provides students with a starting point but you will need to undertake research
into this topic in order to be able to adequately meet the requirements outlined below.

Requirements
You have been approached by a large accounting firm to provide advice in relation to Virtual assets.
In particular, the managers of the firm have requested that you provide a report outlining the
following:
• what are Virtual assets? How are they different to the commonly understood notion of
intangible assets?
• Do these items meet the definition criteria for assets contained in the Framework?
• Do these items meet the recognition criteria for assets contained in the Framework?
• Should these items be recognised on the financial statements or would disclosure in the
notes be sufficient?
• Is income earned in a virtual world “real”? If so, should such profits be reported?
• If we are required to recognise these items on the financial statements then we need to be
able to measure them. What measurement model would you recommend?
In completing this report, students can certainly include information relating to online gaming but
remember that this report is being prepared for an accounting firm whose greater concern would be
other types of Virtual assets. You must therefore not confine your discussion to online gaming, but it
does provide a useful and fairly clear starting point.
Format/expectations
This assignment must be presented as a formal report. If students are not familiar with the
requirements of such a report please refer to the report writing guidelines for assistance.
Your assignment must be prepared in 1½ line or double spacing with 3cm left and right margins.
The word limit for this assignment is 2,500 words. When taking into consideration an allowance of
10% above that amount, your submission should be no more than 2,750 words in length. Penalties
for assignments exceeding the maximum word limit will be imposed at 10% per 100 words or part
thereof in excess of 2,750 words. There is no minimum number of words, but you need to consider
that 2,500 – 2,750 words provides a guide as to the depth and or breadth of coverage you should be
seeking to achieve. If your report is significantly less than 2,500 words you should not seek to
increase your word count simply by padding out what you have already written – rather you should
consider the depth and breadth of what you have prepared.
Your assignment must have a title page. The word count must be printed on the title page. Markers
cannot be expected to look for the word count on cover sheets, in headers or footers or elsewhere.
Marks will be deducted if the word count is not on the title page. (Note: the title page must include
your name and ID or network username, course code and name, title of the paper and the word
count.) Students do not need to attach an assignment cover sheet as these are attached
automatically when the assignment is submitted on Gradebook.
A high standard of presentation is expected. This is a capstone course in a professional qualification
and it is expected that students are able to present a paper of professional quality. At the very least,
check spelling and grammar. Ensure that all aspects of the requirements have been addressed.
Ensure that you comply with Harvard referencing conventions in preparing this assignment and that
plagiarism is not an issue. You are expected to adhere to high standards of academic integrity and
all assignments submitted in this course may be checked for plagiarism.
You need to ensure you comply with these requirements – failure to do so will result in penalties
being applied.

Marking guidelines
marking criteria for this assignment will be available on the course home page.
December 5, 2012, 5:08 PM ET
HOW TO ACCOUNT FOR A VIRTUAL GOOD


Virtual goods brought in about $2.3 billion in sales in 2011, according to Visa’s Playspan unit,
doubling the amount sold since 2009. But the rapid expansion is raising questions among securities
regulators, who would like to see more specifics.
“The sale of a virtual good represents a service, not the sale of an actual good,” said Brad Skinner,
senior assistant chief accountant at the Securities and Exchange Commission’s Division of
Corporation Finance, in comments to an American Institute of Certified Public Accountants
conference in Washington D.C. this week.
Virtual goods, he said, are normally provided over a time period, so companies shouldn’t think about
them like digital movies, music or books sold online. The SEC is frequently asking companies for
“enhanced disclosure” about their virtual goods accounting policies, such as the time period over
which they are recognizing revenue from the sale of a good.
That recognition period could be associated with the expected life of the game, the expected life of
the user, or the expected life of the virtual good, Skinner said.
He also said he would like to see companies disclose more about how virtual goods are purchased —
whether it was with virtual currency, or pre-paid player balances, or a more traditional purchase
method.
Companies selling virtual goods should also be disclosing whether the company is being charged
processing fees by the platform it uses to sell the goods, and whether it faces any legal or regulatory
requirements to refund consumer purchases

http://blogs.wsj.com/cfo/2012/12/05/how-to-account-for-a-virtual-good/ accessed December 12,
2012