Free Case Study On Accounting

Part 1

According to the terms stated in the Equipment and Service Agreement between Hemo and Extracts, Hemo has identified all the potential deliverables. An item is deliverable if it qualifies as a separate unit of accounting. This aspect means that the deliverable item must have a value to the customer on a standalone basis.
Based on the equipment, Hemo should apply the best estimate of the selling price. Since Hemo does not have an own price, and the two competitors in the market all sell a different or same model to a different set of customers, Hemo must use its best estimate according to 605-25-30-6C. For this reason, a reasonable estimate can be made depending on the main fact that the cost to manufacture the equipment including those of labor allocated R&D and material is known. In addition, an estimated markup based on the margin history and added benefits of the new model are known.
Hemo should apply the vendor specific objective evidence for pricing the discount on future supplies. This aspect arises since 605-25-30-6A identifies that the deliverable price is the price when it’s sold separately. Since Hemo sells the supplies boxes separately for $3000 then it is the recommended rice that the discount should be applied.
For the screen and report services prices, the third-party evidence should be used. Hemo-Tech owns a lot of variance in the sales price as related to the amount of equipment that is sold to the buyer; as, cannot apply VSOE. This aspect leaves only the third-party evidence. As per 605-25-30-6B, the selling price should be equivalent to competitor’s price of sale that applies similar services to the same customers on a standalone basis. Because the model has the two competitors that sell the services for Hemo machines on a standalone basis, it should then use these amounts to determine a price for its services.
On the accounting literature,the Revenue recognition guidance is more  specific under U.S GAAP than under IFRSs though the overall concept thatunderlines the revenue recognition in both sets of standards is similar.ASU 2009-13 statesin part that IFRS provides little guidance about the allocation of consideration in a multiple-deliverable arrangement.Though IFRS subsequently requires companies to assess the transaction substance when determining whether deliverables should be combined or separated for accounting purposes.IAS 18 will, in addition, provide Hemo-Tech with the revenue recognition principles of the multiple-element arrangement. In addition to IAS 18, Hemo-Tech should look for IFRIC 13 under IFRS, which discusses revenue recognition for certain multiple-element arrangements.

References

The Trueblood Case Studies | Deloitte US | Deloitte Foundation. (n.d.). Retrieved January 22, 2015, from http://www2.deloitte.com/us/en/pages/about-deloitte/articles/trueblood-case-studies-deloitte-foundation.html