Ameriprise Financial, Inc. 802 Ameriprise Financial Center Minneapolis, MN 55474 Via Email: director@fasb.org October 22, 2010 Technical Director File Reference No. 1820‐100 Financial Accounting Standards Board 401 Merritt 7 Post Office Box 5116 Norwalk, Connecticut 06856‐5116 Re: File Reference: No. 1820‐100, Revenue Recognition (Topic 605) – Revenue from Contracts with Customers Dear Technical Director: Ameriprise Financial, Inc., one of the nation’s leading financial planning, asset management and insurance companies, appreciates the opportunity to offer comments with respect to the Proposed Accounting Standards Update, Revenue Recognition (Topic 605) – Revenue from Contracts with Customers (the “Proposed Statement”). …show more content…
In particular, we believe the alternative interpretation may require nonrefundable fixed rate fees earned/collected to be partially recognized for the percentage of the contract year that has been completed with the remaining recognized evenly during the remainder of the contract year. See the example provided in Appendix A for an illustration of the issue. The alternative interpretation is based on the following guidance in the Proposed Standard: • Paragraph 33(c) which requires straight‐line revenue recognition over the expected duration of the contract if services are transferred evenly over time. • Paragraph 38 and the requirement to recognize revenue from satisfying a performance obligation only if the transaction price can be reasonably estimated. • Paragraphs 39 and IG76 (Example 18) that indicate if consideration is susceptible to external factors (for example volatility in the market) it should not be estimated to determine the amount of revenue to recognize from satisfying a performance obligation. The alternative interpretation is focused on the following facts: • The management contracts generally are for one year. • Fixed fees for asset management contracts are variable based on markets
b. Under some circumstances, even if the time for performance of the contract has expired.
FASB Accounting Standards Codification (ASC) 805-20 (Business Combinations – Identifiable Assets and Liabilities, and Any Noncontrolling Interest) is applicable to our company’s transactions regarding the acquisition of ARU since our acquisition meets the definition of a business combination. Per ASC 805-20-05-1, it states this subtopic provides guidance on how the acquirer shall recognize and measure the identifiable assets acquired, liabilities assumed, and noncontrolling interests in the acquiree. Therefore, this subtopic is applicable to our concern on the disclosure of the extinguishment of debt in financial statements. In addition, per ASC 805-15-2 and ASC 805-15-3, the scope and scope exceptions mention the guidance in this topic applies to all entities and all transactions that meet the definition of a business combination. Per ASC 805-20-50-1, it provides guidance on how our company shall disclose the business combination that occurs during the reporting period, as follows:
(2) The Contractor asserts its right to the adjustment within 30 days after the end of the period of work stoppage; provided, that, if the Contracting Officer decides the facts justify the action, the Contracting Officer may receive and act upon the claim submitted at any time before final payment under this contract.
The purpose of this research paper is to summarize research on codification topic 410 based on the information found in different academic databases. The first part of the paper will focus on the FASB Codification database. The second part of the paper will compare and contrast three other databases on the same codification 410 within the RIA Checkpoint databases: AICPA: Auditing and Accounting Guides, SOX Reporter, and GAAP Practice Manual. A summary of benefits and issues with the searches of each database will also be discussed.
Enter the term of the agreement in number of months in section B. Please understand that the term of this agreement cannot exceed 12 months from the date of execution.
New accounting rules will affect the company’s revenue recognition in the upcoming year. Many companies such as Rolls-Royce Holdings will be affected by this change. Rolls-Royce Holdings books its revenues even before its services performed. For instance, they sell large engines and maintenance service, and Rolls-Royce Holdings booked the revenue even 1.5 years in advance. They will no longer able to book this unperformed revenues for the upcoming year. The investors will have a better picture on the firm’s revenues based on the new revenue recognition. Some sectors, such as telecommunications, media and pharmaceuticals, are expected to be affected more than others, because the firms recognize revenues before they perform the services. Moreover,
(5) Defines what constitutes a month. For the purposes of the contract, a month represents 30 consecutive 24 hour days.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2012). Accounting Principles (10th ed.). Hoboken, NJ: John Wiley & sons.
According to Kimmel, Kieso and Waygandt (2011), "the revenue recognition principle requires that companies recognize revenue in the accounting period in which it is earned." Basically, this means that revenues should be recognized (or in other words recorded) on completion of the process of revenue generation i.e. once revenue has been earned. This is as per the accrual basis of accounting. Essentially, revenue recognition derives its significance from its utilization when it comes to the determination of the specific accounting period in which earnings should be recorded.
In the instant case of Elegant Housing, Inc. neither has the affirmative customer acceptance been received by Caltron Computers, Inc. nor has the 6 month trial period ending on May 15, 20X2 lapsed. In light of the above circumstances and the revenue recognition provisions, it is recommended that the revenue of $400,000 should not be recognized.
Article analysis for Revenue Recognition Timing and Attributes of Reported Revenue: The Case of Software Industry’s Adoption of SOP 91-1 by Yuan Zhang
end date of the project would be April 11th, 2013. However, the case states that if the project
This assignment features the recognition and measurement of revenue depending on the source of revenue in accordance with the provisions of International Accounting Standards (IAS) 18 Revenue.
Inditex owns Zara among others. They demonstrated a strong first-quarter profit and revenue growth across all of its major regions where they operate. From the stock market stance, their shares rose 5.5% in Madrid.
Revenues for license fees should be recognized when the product is delivered. This practice is in accordance with common industry practice and provides a more accurate accounting of when revenue is earned by the company. The current policy for recognizing revenue when the contract is signed as an accurate time period indicator is clearly contradicted by the associated receivables being outstanding in excess of 160 days. As industry norms indicate an average of a 62 day collection period, this indicates that the contract date is not a reasonable basis for estimating the degree of collectability for the receivable and that more accurate estimate measures exist.