The purpose of this assignment is to complete the FASB Codification Assignment. Complete Items 1-2.
Item 1
In conducting year-end inventory counts, your audit team is debating the impact of the client’s right of return policy both on inventory valuation and revenue recognition. The assistant controller argues that there is no need to worry about the return policies since they have not changed in a while. The audit senior wants a more authoritative answer and has asked you to conduct some research of the authoritative literature before she presses the point with the client.
Instructions: Go to http://aaahq.org/asclogin.cfm to log in and prepare responses to the following. Provide codification references for your responses.
- What is the authoritative guidance for revenue recognition when right of return exists?
- When is this guidance important for a company?
- Sales with high rates of return can ultimately cause inventory to be misstated. Why are returns allowed? Should different industries be able to make different types of return policies?
- In what situations would a reasonable estimate of returns be difficult to make?
Item 2
Jones Co. is in a technology-intensive industry. Recently, one of its competitors introduced a new product with technology that might render obsolete some of Jones’ inventory. The accounting staff wants to follow the appropriate authoritative literature in determining the accounting for this significant market event.
Instructions: Go to http://aaahq.org/asclogin.cfm to log in and prepare responses to the following. Provide codification references for your responses.
- Identify the primary authoritative guidance for the accounting for inventories. What is the predecessor literature?
- List three types of goods that are classified as inventory. What characteristics will automatically exclude an item from being classified as inventory?
- Define “market” as used in the phrase “lower-of-cost-or-market.”
- Explain when it is acceptable to state inventory above cost and which industries allow this practice.
General Requirements
APA style is not required, but solid academic writing?is expected.
This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.
You are required to submit this assignment to LopesWrite. Refer to the LopesWrite Technical Support articles for assistance.
Items 1-2 are provided with permission for use in ACC-616 from: Keiso, D. E., Weygandt, J. J., & Warfield, T. D. (2016). Intermediate accounting (16th ed.). Danvers, MA: John Wiley & Sons, Inc.
Notes from the professor
FASB Codification Assignment - tips
Description
Hello:
I received a really great question on how best to approach the FASB Codification Assignment. This is what I provided--I hope this helps in developing your skills from 'copy and paste' to articulating in essay format our responses. Remember, we are not 'just answering questions'...you demonstrated that skill as undergraduates. Now, we take the readings and synthesize what was written, paraphrase it in our own words, and properly cite our sources.
What I would do, is first, you can have a header for each of the questions/topics. For example, I would have aheader called: Item 1: Accounting Estimates and Accounting Changes.
I would then have a paragaph that covers what a change in accounting estimate is, in your own words with an example (Cite your source though in the paragraph). I would then have another paragraph on describing the differences between an accounting change and an accounting estimate (again, with example and citation). So, you can write a minimum of 2 paragraphs as if you are writing an essay response on these concepts.
The key is can you articulate, through synthesis and paraphrasing the concepts and can you provide examples that demonstrate how the concept may be applied in practice.
When we are covering information on guidance, it is more than just providing the link. Again, provide an essay response as to what concerns are addressed regarding accounting disclosures and provide examples.
Attached is the last one that I done!
