CASE STUDY

Financial accounting students are often provided cues regarding a particular recognition/measurement issue prior to learning the related technical material. Yet, anecdotal evidence from the profession suggests that the identification and framing of complex issues is a necessary skill for emerging professionals. This case provides accounting students a hypothetical scenario that requires them to identify several financial reporting issues, research the relevant authoritative guidance, and arrive at conclusions regarding the appropriate reporting treatment. The recent implementation of the updated revenue recognition guidance per Topic 606 from the Financial Accounting Standards Board's Accounting Standards Codification and IFRS 15 from the International Accounting Standards Board provides a current and relevant setting for this issue identification and evaluation exercise. Results from graduate-level courses at two universities indicate that students perceived great benefits in (1) identifying and framing revenue recognition issues without textbook cues and (2) learning the new authoritative guidance. Keywords: FASB Codification; IFRS; revenue recognition; professional research. I. THE CASE On February 15, 2019, the Chief Operating Officer of Larson Industries, Pete Moreen, announced a major step forward for the company: Today, we have entered into an agreement to sell our industry-leading product, the AM300, to Dynamic Wholesale, Inc. Starting on May 31, Dynamic will begin offering the AM300 and our gift cards to its customers. Dynamic is one of the largest wholesalers of consumer goods in the country, and this agreement is vital to the growth of Larson Industries and the brand awareness of the AM300. This morning I spoke with Dynamic's Vice President of Logistics, Suzanne Roberts, who is very excited to carry our flagship product in order to better serve the Dynamic customer base. Your Role and Task As planned, Larson shipped the goods (and gift cards) to Dynamic on May 15, and all items were inspected and formally accepted by Dynamic personnel and were delivered to the warehouses within ten days, available to be sold to Dynamic customers on May 31. In preparation for closing the company's books for the May 31 year-end, Chief Financial Officer Catherine Budge is considering the appropriate accounting treatment of the transactions with Dynamic, including any issues that may impact the company in subsequent accounting periods. This agreement with Dynamic has many unique features that Larson has not yet encountered. As an experienced accountant, you have been asked to provide assistance to the CFO by We appreciate the guidance offered throughout the review process from Valaria P. Vendrzyk (editor), an associate editor, and two anonymous reviewers. The case was completed by accounting students at the University of Montana and Gonzaga University, and we are grateful for their time, effort, and valuable feedback. We also thank Xiaoqing Huang for her help in preparing the manuscript. Editor's note: Accepted by Valaria P. Vendrzyk. Submitted: February 2019 Accepted: January 2020 Published Online: February 2020 65 researching appropriate financial reporting guidance to determine the proper course of action for all of the relevant aspects of this sales contract. Detailed information on the two companies and their agreement is provided below. Larson Industries Larson Industries is one of the leading manufacturers of specialty carpentry and premium craftwork tools. The AM300 is the company's most popular

NOTE

Review the specifics of the agreement between Larson and Dynamic and identify four (4) potential accounting issues related to Larson's recognition of revenue on the sale of AM300 to Dynamic. The case presents more than four issues, but must be laid on four issues only for this report.

REPORT should be in APA format 7th Edition.