Case 10-11 Solution Essay example

1841 Words Apr 16th, 2012 8 Pages
1. Is Eye Vision’s arrangement with Holland Hospital within the scope of ASC 985-605, Software: Revenue Recognition?
In this case, the main content of the Eye Vision’s arrangement with Holland Hospital include embedded software medical equipment and an initial option to purchase a two-year separately priced maintenance agreement.
In this case, because“Eye Vision has never sold, nor does it offer to sell, the Clear View Laser without the embedded software because the software is necessary to perform the medical procedures for which the laser is intended”, and “Eye Vision has never sold, nor does it offer to sell, the Clear View Laser without the embedded software because the software is necessary to perform the medical procedures for
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b. Subparagraph superseded by Accounting Standards Update No. 2009-13 c. If the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item or items is considered probable and substantially in the control of the vendor.

ASC 605-25-55-1
This diagram represents an overview of the provisions of this Subtopic with respect to determining the separate units of accounting in an arrangement and should, therefore, be reviewed in conjunction with the guidance in the entire Subtopic.

4. On the basis of the responses to Question 3, discuss the revenue recognition accounting literature that would be applied to each unit of accounting identified in this arrangement.

There are two units of accounting on the basis of the responses to Question 3. The first one is the Clear View Laser with the embedded software; and the second one is the two-year separately priced maintenance services. Based on ASC 605-25-25-2 (c) of FASB, it points out that applicable revenue recognition criteria shall be considered separately for separate units of accounting.

For the Clear View Laser with the embedded software, it applies ASC 605-10 of FASB, the overall revenue recognition. Based on ASC 605-10-25-1, the recognition of revenue and gains involves

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