Professional Research Employees at your company disagree about the accounting for sales returns. The sales manager believes

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Professional Research Employees at your company disagree about the accounting for sales returns. The sales manager believes that granting more generous return provisions and allowing customers to order items on a bill-andhold basis can give the company a competitive edge and increase sales revenue. The controller cautions that, depending on the terms granted, loose return or bill-and-hold provisions might lead to non-IFRS revenue recognition. The company CFO would like you to research the issue to provide an authoritative answer.

Instructions Access the IFRS authoritative literature at the IASB website (http://eifrs.iasb.org/ ) (you may register for free elFRS access at this site). Under the Standards Development tab, click on Work plan for IFRS and go to Revenue Recognition. Click on “Summary of Board Deliberations.” When you have accessed the documents, you can use the search tool in your Internet browser to respond to the following questions.

(Provide paragraph citations.)

(a) What is the authoritative literature addressing revenue recognition when right of return exists?

(b) What is meant by “right of return”? “Bill and hold”?

(c) Describe the accounting when there is a right of return.

(d) When goods are sold on a bill-and-hold basis, what conditions must be met to recognize revenue upon receipt of the order?

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Intermediate Accounting IFRS Edition

ISBN: 9781118443965

2nd Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

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