1.
02 : Hotel policies and procedures
1.02.03 : Finance Department
Procedure no. : 1.02.03.01.10 Effective date : 01/03/2012
Prepared by : Director of Finance GM approval :
Affecting : Finance Team
Subject : Accounting of Barter Deals
Purpose
Purpose of this policy is to define uniform procedure for the authorization and
accounting of all Barter deals (exchange of goods and services).
It is the policy of the hotel that all barter deals/agreements e.g. Advertisement, hotel
services, promotions, air tickets and any other non-cash EXCHANGE of goods or
services are stated completely and accurately in the hotel’s accounts and must be
approved by the General Manager and be Director of Finance before any
commitment is made.
Procedure
Certain services such as advertising, other hotels services and airline tickets etc.
may be acquired in exchange for hotel services or advertising space available inside
the hotel.
Whenever such an arrangement is made, it must be supported by a written
agreement setting forth the exact terms of the exchange. This agreement must be
approved by the Department Head (EXCOM) reviewed by Director of Finance and
signed by the General Manager and the authorized representative of the second
party.
Such barter arrangements must be accounted for in a similar manner as an
independent purchase and sale agreement. The same economic consideration must
be given to the terms of a barter arrangement as all other business decisions and it
shall not be less beneficial to hotel.
This policy shall not extend to minor ad-hoc arrangements which do not have a
material value, for example sundry marketing promotions such as vouchers or
transactions which are more of a sponsorship nature like an airline ticket given as an
award in an outlet in return for advertising on the menu.
Rates and restrictions applied to the hotel sale of services must be comparable to
that received from the second party. For example, when airline tickets are acquired
through a barter deal, if the airline charges the ticket at their full fare equivalent, then
the hotel rooms or other services must also be charged at hotel rack rates. Should
the airline allow the application of excursion fares and other discounts available in the
market, then a similar consideration may be given to the airline for the room rate,
such as the corporate rate.
The accounting treatments for barter arrangements are as follows:
When the second party utilizes any or all of the hotel services due, the charge should
be raised in the normal manner, crediting the appropriate revenue accounts. The
usual folio or invoice is issued to the second party, including service charge or taxes.
The folio or invoice is offset against the appropriate barter agreement control
account.
When the hotel receives services from the second party, an invoice is requested and
recorded as an expense. The expenses must be the same as for the same services
purchased through a normal purchase agreement. The “payable” created through
the recording of the invoice is then offset against the appropriate control account.
It should be noted that barter agreements usually expire after a given period of time
which must be specified in the written agreement, but normally shall not exceed one
year. Care must be taken when the agreement is made that the hotel will be able to
make use of the entire amount of the services, taking into account any restrictions
applied by the second party.
If an agreement expires with a balance remaining, that balance must be cleared from
the Balance Sheet in the month of expiry. Any outstanding balance of an expired
Barter Contract Receivable (services not utilized by the hotel) should be expensed to
the account that would have been charged had the service been used. Any
outstanding balance of an expired Barter Contract Due (hotel services not utilized by
the second party) should be taken into Miscellaneous Income.
-End of Policy-
