Revenue Recognition
The company recognises revenue from its monthly recurring service agreements over the period in which the services are delivered. Where invoices have been raised in advance of the period to which the services relate, the associated income is deferred at the year end to reflect only the revenue earned to the balance sheet date. This ensures that income is recognised in the period in which the related work is performed.
Change in Estimate – Depreciation of Tangible Fixed Assets
During the year, the directors reviewed the basis on which depreciation is charged on the company’s tangible fixed assets. As a result of this review, the depreciation model was changed from 33% straight-line to 20% reducing balance.
This has been treated as a change in accounting estimate rather than a change in accounting policy, in accordance with FRS 105 paragraph 10.15, as it reflects a reassessment of the pattern in which the assets’ future economic benefits are expected to be consumed.
The directors consider that the 20% reducing balance method more appropriately reflects the useful economic lives and consumption pattern of the company’s equipment. The change has been applied prospectively from 1 December 2023, and the impact on the current year’s depreciation charge is not considered material.