Topics: Generally Accepted Accounting Principles, Shipping, Income statement Pages: 2 (301 words) Published: September 26, 2014
Biovail Corporation
Issues :
1) The company has the problem with their recognition of the profit Whether they should realize or not the revenue for the third quarter. 2) Issues on the concepts of revenue recognition that have been apply in the company to show their financial results. Whether Biovail Corporation recognize its revenue using FOB shipping point or FOB destination. Suggested Solution

1) FOB Destination shipping term
The truck accident had no impact on company’s third quarter financial results. The truck left Manitoba on Sep 30, which was too late to reach Distributor’s North Carolina facility prior the end of the quarter. Biovail could not have recognized revenue resulting from the shipment regardless of the accident. 2) From David Maris view, Biovail should not be able to record revenue from the sale of drugs in the truck in the third quarter. 3) Refer to page 2 from the 4th and 5th paragraph, it has been mentioned there has been a disagreement on the FOB contract structure which could lead to a trace back to an attempt by personnel in Biovail to setup an accounting fraud scheme from the truck accident. From Biovail most recent filing with US SEC stated that they recognized product sales revenue when the product was shipped to the customer provided that the firm had not retained any significant risk of ownerships or future obligations with the respect to the product shipped. Recommendation

Biovail should have their own code of ethics that can be used as a guideline by their employees To ensure their sustainability, Biovail should avoid overestimate of products and overstating revenue. Their employees, especially who are related to financial department, should well-understood about the FOB shipping point and FOB destination to avoid misstatement in financial reporting that will mislead the users of financial statements.
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