The time frame in each of these scenarios is after the effective date of the new revenue recognition rules in ASC Topic 606.
Required:
For each of the following independent situations, determine the point at which a contract exists and is subject to application of the 5-step revenue recognition model by Amiel Corporation.
1. A regular customer of Amiel's always places an order on the last day of the month, but did not do so in December. Amiel is certain it is because the customer's purchasing manager was ill and that the order will be received when she returns. In fact, the order is received by fax in early January, with an apology from the customer's purchasing manager and a note requesting that Amiel "expedite shipment of this December order."
2. One of Amiel's customers calls and gives Amiel a list of goods it intends to buy, but with the caveat that the order is subject to the approval of the purchasing manager, who will not be in for several days. In fact, the order is received by fax several days later when the purchasing manager returns.
3. One of Amiel's customers calls and gives Amiel an order. Amiel typically receives orders by fax and asks the customer to confirm the order by fax, which it does several days later.
4. Amiel and one of its customers agree that Amiel will sell it certain goods, but that the price will depend on the price of oil two weeks later. Amiel and the customer have agreed on a formula that will determine the price of the goods based on the price of oil. Amiel makes this arrangement because oil is a key component of the goods Amiel sells.