Biovail Corporation Case Summary

STATEMENT OF THE PROBLEM After a thorough reading and understanding of the case of Biovail Corporation: Revenue Recognition an FOB Sales Accounting, first issue or problem that arise is regarding the policy of the accounting for revenue recognition. Since the stock of Biovail was listed on the New York Stock Exchange, they are complied with the U.S GAAP which mentioned that revenue must be earned and realized or realizable for it to be recognized. Under SAB 101, there are four criteria which can satisfy the conditions of recognition. But from the case, only three criteria are met. First criteria is persuasive evidence of an arrangement exists which to be said the substance of transaction should indicates the sale of transaction is indeed has taken place. In this Biovail’s case, no information can be found that fit with criteria but there is a chance of persuasive of evidence between Biovail and its Distributor. Second is criteria are the price can be determined or fixed. This criterion is met since the price is mentioned based on the explanation of other Analyst J.P Morgan in his calculation. Lastly, collectability is reasonably assured and this is too …show more content…
Employees should practice ethical principles in their daily operations in the company so that they won’t involve in any unethical activities. Biovail should not overstate the revenue loss when the accident happened. The company mostly will know the estimated revenue that the company will earn for each transaction as they can hire some professional to do some calculation on their estimated revenue, so if they purposely overstate the revenue loss may consider as unethical activity. By having code of ethics, employees will know what activities consider unethical so that they won’t carry out those unethical activities. This can also boost in consumer confidence and improve their business. This can increase their company’s