Medical Devices Inc. is a public company that trades its securities on the American Stock Exchange. The company needs to increase sales in the month of December by $3 million. Management has determined that the company has products available to ship to customers prior to year-end. Medical Devices’ CEO calls three specific customers and convinces each customer to order $1 million worth of products, which Medical Devices delivers prior to year-end.
In reviewing Medical Devices’ normal and customary business practice for these types of customers, you notice that a written sales agreement with an authorized customer signature is required for the sale to be binding. Medical Devices prepared and signed the sales agreements and faxed them to the three customers prior to year-end. One customer signed and dated the agreement on 12/29 and returned it to Medical Devices. The other two customers did not sign their agreements until 1/10 of the following year due to a required review by their legal departments. However, they reported to Medical Devices that this was just a formality and the agreements should be returned by 1/15. As a result of these verbal commitments, the CEO had the accounting department record the $3 million as sales in the current year. 

Required: 

Medical Devices’ controller is questioning whether the $3 million in sales related to these three customers can be recorded this year as revenue. Provide your response to the controller with appropriate citations from the FASB’s Codification.