Case 13-4 Hemo Tech
Case 12-4 Part I and II only
HemoTech Inc.
This case gives students an opportunity to determine the appropriate accounting for multiple-element revenue transactions under US GAAP and to explore the sources of IFRS s guidance for multiple element revenue transactions, specifically related to the identification of deliverables and the determination of selling price. Part I
Applicable Professional Pronouncements
ASC 450, Contingencies (ASC 450)
ASC 605 -10 -S99, Revenue Recognition: Overall: SEC Material (ASC 605
10 - S99) (formerly SEC Staff Accounting Bulletin Topic 13.A.3(c), Question 2,
“What factors should be considered in the evaluation of whether a remaining obligation related to a unit of accounting is inconsequential or perfunctory? ”
(Quest ion 2 of SAB Topic 13.A.3(c)) )
ASC 605 -20, Revenue Recognition: Services (ASC 605 - 20)
ASC 605 -25, Revenue Recognition: Multiple-Element Arrangements (ASC 605 -25) (as updated by ASU 2009 - 13, Multiple-Deliverable Revenue Arrangements (ASU 2009-13))
ASC 926, Entertainment —Films (ASC 926)
ASC 985-605, Software: Revenue Recognition (ASC 985 -605)
ASC 985-605-15 -3(d), Software: Revenue Recognition (ASC 985-605-15-3(d))
ASC 985-605-55-82 through 55-85 Software: Revenue Recognition (ASC 985-605-55-82 through 55-85)
Discussion
Hemo-Tech Inc. (“Hemo”) identified the five units of equipment, 50 boxes of equipment supplies, installation, one-year monitor and test services, and three-year screen and report services as deliverables in the arrangement.
Has Hemo identified all the potential deliverables in the arrangement?
If not, what are the other potential deliverables?
Explain how you determined whether an item is a deliverable.
Solution Outline
A) Hemo has not identified all the potential deliverables in the arrangement. Although the accounting literature does not define what a deliverable is, entities may consider the following in identifying potential
HemoTech Inc.
This case gives students an opportunity to determine the appropriate accounting for multiple-element revenue transactions under US GAAP and to explore the sources of IFRS s guidance for multiple element revenue transactions, specifically related to the identification of deliverables and the determination of selling price. Part I
Applicable Professional Pronouncements
ASC 450, Contingencies (ASC 450)
ASC 605 -10 -S99, Revenue Recognition: Overall: SEC Material (ASC 605
10 - S99) (formerly SEC Staff Accounting Bulletin Topic 13.A.3(c), Question 2,
“What factors should be considered in the evaluation of whether a remaining obligation related to a unit of accounting is inconsequential or perfunctory? ”
(Quest ion 2 of SAB Topic 13.A.3(c)) )
ASC 605 -20, Revenue Recognition: Services (ASC 605 - 20)
ASC 605 -25, Revenue Recognition: Multiple-Element Arrangements (ASC 605 -25) (as updated by ASU 2009 - 13, Multiple-Deliverable Revenue Arrangements (ASU 2009-13))
ASC 926, Entertainment —Films (ASC 926)
ASC 985-605, Software: Revenue Recognition (ASC 985 -605)
ASC 985-605-15 -3(d), Software: Revenue Recognition (ASC 985-605-15-3(d))
ASC 985-605-55-82 through 55-85 Software: Revenue Recognition (ASC 985-605-55-82 through 55-85)
Discussion
Hemo-Tech Inc. (“Hemo”) identified the five units of equipment, 50 boxes of equipment supplies, installation, one-year monitor and test services, and three-year screen and report services as deliverables in the arrangement.
Has Hemo identified all the potential deliverables in the arrangement?
If not, what are the other potential deliverables?
Explain how you determined whether an item is a deliverable.
Solution Outline
A) Hemo has not identified all the potential deliverables in the arrangement. Although the accounting literature does not define what a deliverable is, entities may consider the following in identifying potential