A Thesis Presented to the
UST-AMV College of Accountancy
University of Sto. Tomas

In Partial Fulfillment
of the Requirements for the Degree of
Bachelor of Science in Accounting

Group 8: Section 4A4
Marie Josephine Cabantog, Stephanie Janel Co,
Jefferson Lexus Jonson, Eunice Lim,
Natasha Monica Ong

Chapter 1: Problem: Rationale and Background
Flash sale, or deal-of-the-day, is an ecommerce business model that had risen
popularly in the internet today. Offering potential customers with high discounted
products and services, the said model continually expands up to date, with many
companies trying such tactic to win an easy customer by the hour.
Websites offering a flash sales service let potential customer sign up for an
account for them to buy different deals flashed in the home page. These deals are
online coupons or vouchers that have a high discount rate for a product or service
offered by different companies, often lasting for a maximum number of slots and hours
in which it would be availed.
For the past nine years, flash sales have existed and with different companies
ready to edge out the competition, the said business model will continually grow, having
forecasted to have a customer spending in the US of about $4 billion (Kelsey, 2011).
Within these factors that questions about proper accounting procedures, such as
revenue recognition standards, be raised not just on transacting companies but also to
website companies offering these flash sales services. Being new to the market, the
underlying question goes to the proper revenue reporting standard to be applied in the
said business model and if such standard is being observed uniformly by companies
Furthermore, it is also of question as to the transparency of each transaction and
revenue recognized, having high discount rates offered by companies and having
different cost that goes along with the transactions. The credibility of each transaction is
the put to the test.
Research Question
This study was conducted for the purpose of determining what accounting
procedure and what accounting standards are being used by the companies involved
during the period of research. Specifically, the study attempted to answer the following
What accounting procedures and standards are applied by transacting
companies and host websites in reflecting their revenues and discounts? Considering
the absence of such transaction on existing local standards, are companies uniformly
applying a certain standard that would reflect revenues properly? Do the host websites
and the transacting companies share a principal/agent relationship?
Theoretical Framework
IFRS has some provisions regarding promotional ventures by a company to
generate customers, such as loyalty programs, premiums and coupons, and gift
certificate. However, these standards do not define, in its entirety, the proper accounting
procedures done on flash sales transactions; flash sales transactions, being viewed as
a combination of these standards.
IAS 18, on the other hand, covers the general revenue recognizing standard; in
this standard, companies are guided as to when revenue may be recognize or when
should it be deferred.

FIG 1.1 General measurements of revenues according to IAS 18.
IAS 18 shows the basic revenue recognition standard. This standard basically
shows the accrual and/or deferral of revenue.
There are two types of recognizing revenue, accrual and cash basis.
Under accrual basis, the revenue is to be recognized by the seller only when the
rewards and benefits related to the items sold or service provided is transferred, where
the amount can be estimated reliably and when it is recoverable.
Revenue is recognized in selling goods when the risk and rewards associated to
the goods are transfered to the buyer. When goods are sold on credit, the revenue is
recognized along with a receivable. In case of services, revenue is recognized on the
completion of the service specified in the contract.
Revenue is recognized on the basis of stage of completion of the services
specified in the contract in case of the rendering of services. Any receipts from the
customer in excess or short of the revenue recognized in accordance with the stage of
completion are accounted for as prepaid income or accrued income as appropriate.
Under the cash basis, revenue is recognized when the cash is received.
The researchers, now, would want to have a comparative analysis of the
standards used by companies practicing flash sale, and would want to cover the
appropriateness of IFRS based standards on flash sales. As mentioned before, these
IFRS based standards are limited to a certain nature of transactions. Flash sales, being
new to the market, would test the effectiveness of said standards—whether they are
sufficient to cover the transactions present on the said sales or there is a need to
develop a new reporting standard more appropriate to use on such transactions.
Though IFRS covers accounting for these types of transactions, the inherent limitation
to it is in the nature of these incentive programs. IFRS based standards focuses on
certain types of transactions

Conceptual Framework

In order to evaluate the companies’ accounting principles as to revenue
recognition, the researchers have come up with a conceptual framework which will
weight its differences.
The researchers will draft a survey which will be based on generally accepted
accounting standards. Through here, the researchers will seek for the differences of
each company as to their revenue recognition. This will be then the basis for the
researcher to evaluate each company’s accounting principle in recognizing their
Company A Company B
Based on this principle, the company’s
_______ ‘s Accounting Policy is more
revenue. Using the generally accepted accounting principles, the researcher will be into
a conclusion on which accounting principle is more appropriate in the flash sales
Significance of the Study
The researchers consider this study beneficial, not only to themselves, but also
to different companies that are affected by flash sales through assisting them what
proper accounting procedure to apply in different transactions covered by flash sales.
This may help them have a better judgment on reporting properly the different accounts
affected by each transaction, especially revenue-related accounts.
The researchers also believe that this study is significant for companies hosting
flash sales website. This may guide them in assessing each transaction faced by their
website and how transparently they may report revenue for different stakeholders.
This research may also be of interest by people in the Board of Accountancy
(BOA). This research may help them analyze existing accounting standards and let
them deem whether to create or modify existing standards for the fitting of flash sales
This research is also may also be valued by those in the academe and the rest of
the student body. This research seeks to sustain critical thinking on students and
professors. This research hopes to generate opinions on both students and professors
regarding transactions on flash sales.
Mostly, this study would be beneficial for the development of the researchers as
they gain more knowledge and expertise on the said issue.
Scope and Limitations
The research focuses on selected companies that use flash sales as a marketing
strategy and selected companies that host flash sales.
Furthermore, the study is only a comparative study about accounting procedures
and accounting standards used by these companies. This study only seeks whether
companies use a uniform standard as to the accounting of transactions, and if so, the
study also seeks the said standard that is applied on those transactions.
The research focuses only on the revenue recognition aspect and related aspect
of each transaction. The study does not cover other accounting matter such as
inventory accounting.
Though the research seeks a uniform standard to be applied on transactions
done in flash sales, especially revenue recognition standard, it does not aim to suggest
a specific standard on the said matter, considering the age of this business model in the
country and further developments in accounting procedures.
1. Both the transacting companies and host websites are using IFRS based
standard in accounting for revenues under flash sales transactions.
2. Both transacting companies and host websites are not using IFRS based
standards in accounting for revenues under flash sales transactions but use a
common standard adopted from other GAAP.
3. In its absence in the local standards, there is no uniformity as to the standard
being applied by each company on flash sales transactions.
1. Companies may adopt other standards in the absence of such standard in the
2. Companies are not limited as to the adoption of US GAAP and may adopt other
3. There is an inherent limitation as to the use of IFRS based standards on the
transactions done on these transactions.
Definition of Terms
1. Flash sales: an online marketing activity that uses social media to transform
discounted ecommerce promotions into social buying experiences (Boon, Wiid,
&DesAutels, 2012).
2. IAS 37: It sets out the accounting and disclosure requirements for provisions,
contingent liabilities and contingent assets, with several exceptions (IFRS, 1999).
3. IAS 18: outlines the accounting requirements for when to recognize revenue
from the sale of goods, rendering of services, and for interest, royalties and
dividends. Revenue is measured at the fair value of the consideration received or
receivable and recognized when prescribed conditions are met, which depend on
the nature of the revenue (IFRS, 1993).