Good Accounting Practice in Service Contracts -According to the Swedish Supreme Administrative Court

Abstract

This thesis investigates what good accounting practice in terms of service contracts is according to the Supreme Administrative Court and whether the arguments in the grounds for the decisions still are sustainable compared to current standards. Furthermore, it investigates how the accounting solutions approved by the Supreme Administrative Court relate to the quality of information investors are provided with, which is of relevance since the precedents are used as guidance by firms and the Swedish Tax Agency. To analyze the legal cases an argumentation analysis is used. After analyzing the results from the argumentation analysis, some guidelines for what the court considered good accounting practice were observable. Firstly, expenditures for acquisition of future profitable contracts are allowed to be expensed immediately, even though revenue from the contracts is recognized as linear during the entire contract period. Secondly, recording of accruals of income is approved in cases when the future commitment has a greater as well as a limited extent. However, the court found that for recording accruals to be allowed, the amount must be material. Further, our conclusion is that the arguments in the Supreme Administrative Court’s grounds for the decisions in each of the reviewed legal cases still are sustainable compared to current standards, with one exception where no conclusion could be made. In addition, half of the accounting solutions approved by the Supreme Administrative Court provide investors with high quality information in accordance with the definition of quality in this thesis. In the other cases, the approved accounting solutions are not providing investors with high quality information.