In recent years, several high-profile incidents of improper revenue recognition attracted the attention of the business media. The SEC has also expressed concerns about the number of instances of improper revenue recognition identified by SEC staff. One revenue issue involves "bill and hold" sales. In a bill and hold transaction, a customer agrees to purchase the goods, but the seller retains physical possession until the customer requests shipment to designated locations. Normally, such an arrangement does not qualify as a sale because delivery has not occurred. Under certain conditions, however, when a buyer has made a firm purchase commitment and has assumed the risks and rewards of the purchased product, but is unable to accept delivery because of a compelling business reason, bill and hold sales may qualify for revenue recognition. Read the SEC guidance on revenue recognition (www.sec.gov/interps/account/sabcodet13.htm) to answer the following questions:

Required
a. What does the SEC indicate are the four basic criteria for determining whether revenue is realized or realizable?
b. A customer of your audit client, Henson LLC, made a formal written request to establish a bill and hold arrangement in November 2011, an arrangement which is typical in the industry. The customer's written request outlines a delivery schedule that will begin in February 2012. As of November 2011, the product to be shipped in February is already complete and ready for shipment. Because the sale was completed in 2011, your audit client would like to record the bill and hold the transaction described as a sale in 2011. You do not recall noticing any inventory held in a separate area of the client's warehouse during the December 31, 2011 inventory observation. In making your determination regarding the timing of the revenue recognition, what criteria has the SEC determined to be important?