Table of Contents 1.0 INTRODUCTION Biovail Corporation was one of the Canada’s largest pharmaceutical publicly traded companies which expert in the development and large scale of manufacturing of pharmaceutical products. Biovail Company engaged activities on enhance formulate of the existing drugs‚ clinical testing‚ manufacture and commercial pharmaceutical products and utilized advanced drug delivery technologies. In the case‚ on September 30‚ 2003 there was a truck carrying a shipment
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issue of revenue recognition practices is an area that has received a lot of attention from regulators. Whenever there is a report of financial restatements or negative earnings‚ regulators pay extra attention to review the financial statements in order to verify that that there are not any indications of financial fraud or that the organization overstepped their boundaries in the area of managed earnings. The reason that regulators have taken a special interest in financial accounting and potential
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its direct sales force‚ and third-party wholesalers‚ resellers‚ and value-added resellers. (Source: Company Form 10-K) Refer to the financial reports of Apple‚ Inc. for the year ended September 25‚ 2010 +Concepts+ a. In your own words‚ define "revenues." Explain how revenues are different from "gains." b. Describe what it means for a business to "recognize" revenues. What specific accounts and financial statements are affected by the process of revenue recognition? Describe the revenue recognition
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The revenue recognition principle is a foundation of accrual accounting and one of the main principles of GAAP. The revenue recognition principle is a set of guidelines that helps accountants to identify when a revenue event has taken place and how to appropriately record cash exchanges before‚ during‚ and after the revenue event. According to the revenue recognition principal‚ revenue must (1) be realized or realizable and (2) earned‚ in order to be recognized. According to the SEC revenue is realized
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Biovail Case Part 1: Assumptions: 1. The mark-up is from the Distributor to the Wholesaler‚ and the margin is from the Wholesaler to the Retailer Biovail Distributor purchase price Wholesaler purchase price = Distributor purchase price + 400% mark-up Retailer price = Wholesaler price + 35% margin 2. We don’t know the excess space needed in the truck for the 64 gallon drums so we assumed that the 1.00 cm3 accounts for the excess space
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trailer 1.5x=191‚250‚000 X=127‚500‚000 d. How much revenue does Biovail get from a single pill ? 400% 35% $2.83 Biovail → Distributor → Wholesaler → Retailer 0.52 ← 2.10 / 400% ← 2.83/1.35%=2.10 127‚500‚000 x 0.52= $6‚630‚000 One truck can definately carry $10 million worth of Wellbutrin XL tablet product. 2. How should the company recognize revenue based upon the two possible FOB contract structures mentioned in the case? Since Biovail’s stock is publically owned it needs
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A: The primary criteria the auditor should use in determining revenue to be recognized are: (1): persuasive evidence of an arrangement exists. (2): Delivery has occurred or services have been rendered. (3): The seller’s price to the buyer is fixed or determinable. (4): Collectability is reasonably assured. The most basic principle for revenue recognition is revenue has been realized or realizable and earned. B: (1) a: Multiple deliverable. Does the software and one year internet service has
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Biovail Corporation Issues : 1) The company has the problem with their recognition of the profit Whether they should realize or not the revenue for the third quarter. 2) Issues on the concepts of revenue recognition that have been apply in the company to show their financial results. Whether Biovail Corporation recognize its revenue using FOB shipping point or FOB destination. Suggested Solution 1) FOB Destination shipping term The truck accident had no impact on company’s third quarter
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Executive Summary Biovail Corporation‚ a major Canadian pharmaceutical company listed on the New York Stock Exchange‚ announces that it will miss its quarterly earnings target by $25 to $45 million‚ blaming $10 to $15 million of the shortfall on a truck accident involving a shipment that left its facility on the last day of the quarter. The case was ultimately prosecuted by the U.S. Securities and Exchange Commission (SEC). The case is centered on the question of revenue recognition and how the company
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3.6 Revenue recognition with examples when goods are sold under sale or return There are cases when payments are received prior to events that trigger revenue recognition. In that case‚ cash is debited and the unearned revenue is credited. On the other hand‚ when revenue recognition is triggered before actual payment is received‚ accounts receivable is debited while revenue is credited (“Revenue Recognition Principle‚” 2013). Goods are sold under sale or return when they are “sent by the supplier
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