Fasb Fra 2

Only available on StudyMode
  • Topic: Sales, Revenue, Cost of goods sold
  • Pages : 3 (943 words )
  • Download(s) : 734
  • Published : March 10, 2013
Open Document
Text Preview
Teacher:WEI LIU
Student: QIANWEN XU
The project: FRA#2

(a)What is the authoritative literature addressing revenue recognition when right of return exists? If a transaction is within the scope of specific authoritative literature that provides revenue recognition guidance, that literature should be applied. However, in the absence of authoritative literature addressing a specific arrangement or a specific industry, the staff will consider the existing authoritative accounting standards as well as the broad revenue recognition criteria specified in the FASB's conceptual framework that contain basic guidelines for revenue recognition. Based on these guidelines, revenue should not be recognized until it is realized or realizable and earned.(FASB ASC 605-10-25-3; FASB ASC 605-10-25-5)Recognition and Measurement in Financial Statements of Business Enterprises, paragraph 83(b) states that "an entity's revenue-earning activities involve delivering or producing goods, rendering services, or other activities that constitute its ongoing major or central operations, and revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues". Paragraph 84(a) continues "the two conditions (being realized or realizable and being earned) are usually met by the time product or merchandise is delivered or services are rendered to customers, and revenues from manufacturing and selling activities and gains and losses from sales of other assets are commonly recognized at time of sale (usually meaning delivery)" In addition, paragraph 84(d) states that "If services are rendered or rights to use assets extend continuously over time (for example, interest or rent), reliable measures based on contractual prices established in advance are commonly available, and revenues may be recognized as earned as time passes."

(b) What is meant by “right of return”?
Right of return(FASB ASC...
tracking img