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Acc Case 10-1

In: Business and Management

Submitted By jojolabellavita
Words 1076
Pages 5
GROUP CASE 10-1

1.
From the documents of "Deliverables" on blackboards, although the words “deliverable” did not have a clear definition, there are lots of potential deliverables that entities may considering. We can find that in the case 10-1 SolvGen Inc., the selling of proprietary instrument systems, which is under the five-year license and distribution agreement, is a deliverable. From the case we know that Careway will have the right to market and distribute the proprietary instrument systems and pay SolvGen for each proprietary instrument system in the future. The five-year license and distribution agreement requires Careway to pay SolvGen for each proprietary instrument system when it is purchased by Careway. A deliverable must have objective value on a stand-alone basis. The five-year research and development agreement doesn't have a deliverable because it's integrated with the five-year license and distribution agreement and doesn't have a stand-alone value. According to FASB ASC 605-25, it's not a deliverable.

2.
According to FASB Statement of Financial Accounting Concepts(CON) 5,Recognition and Meaurement in Financial Statements of Business Enterprises, revenue is considered “earned” if an entity has substantially accomplished what it must do to be entitled to the contractual benefits. Revenue is “realizable” when related assets received are readily convertible to cash or claims to cash. In this case, SolvGen should recognize the nonrefundable milestone payments as revenue when Careway launches the proprietary instrument systems, because the launch date of the systems is the time that Careway begins to benefit from the systems. Before that date, the nonrefundable milestone payments should be recognized as unearned revenue. The advance payments such as Exclusive negotiation payment(1 million) and contract signing payment(2 millions) should be

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