Case for Accounting Class

1401 Words Sep 7th, 2011 6 Pages
Revenue recognition is one of the top causes for financial statement restatements. In addition, revenue recognition is an area commonly questioned by the Securities and Exchange Commission (SEC) staff in their review of public filings and resultant comment letter process. Furthermore, revenue recognition is often prey to financial fraud.

Coverage of revenue recognition in intermediate accounting courses is typically limited to learning and applying the criteria for revenue recognition outlined in the Financial Accounting
Standards Board’s (FASB) Statement of Financial Accounting Concepts No. 5, Recognition and
Measurement in Financial Statements of Business Enterprises, to routine transactions and topics, such as
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CCPC discontinues the coupons for its new detergent on October 1, 2009. The coupons expire on October 1, 2010. CCPC has not offered coupons on detergent before, nor have they offered coupons with a one-year expiration period. They have, however, offered coupons with a six-month expiration date on other products. Those coupons had a 1.5 percent redemption rate. CCPC estimates that approximately 2 percent of the detergent coupons will be redeemed by customers prior to the expiration date. However, CCPC does not have any data on the redemption rate for coupons offered on detergent. CCPC has sold (and recognized revenue for) over $2,000,000 of Fresh & Bright into the supply chain by September 30, 2009.

Case 1: Requirements

CCPC is considering how it should account for the Fresh & Bright coupon drop that took place on October 1, 2009. In doing so, CCPC asks for your help. Prepare a memo addressing the following questions. Base your analysis of the following questions on the relevant authoritative literature and discuss the support in that literature for your conclusions. Be sure to cite the relevant components of the Codification (available at: in your discussion. Citations are not required for journal entries.

*Note: the questions are used as a guide for your memo. This is not an “Answer the questions” assignment.

1. What are the accounting issue(s) and the relevant components of

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