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Please follow the instructions to log in. 1. 2. Click on the green button that says ‘FASB User Login’. Do not click on the ‘Login’ button at the top right-hand side of the screen. 3. Input the username and password. The password is case sensitive. Username: AAA50943 Password: X8q9gFS The following questions deal with using the FASB Accounting Standard Codification (ASC) to answer accounting questions. Given the following scenarios below, where would you look within the ASC to find guidance? Use the appropriate ASC citation format (i.e., ASC Topic Number – Subtopic Number – Section Number – Subsection number). Explanations of the guidance are not required.

1. You have been assigned to audit a cable television company. You are unsure of whether the company has correctly recognized some of its deferred revenues (i.e., hookup revenues).

2. You are reading the footnotes of a company’s financial statements, and they note that within the revenue number recognized, they include sales of a product where the buyer has the right to return the product. You are unsure whether the company has met the appropriate conditions to recognize the revenue from those sales.

3. You have been hired to help keep accounting records for a film entertainment company. You are unsure whether and how to measure the value of a liability already recognized on the firm’s financial statements.

4. You have been tasked with accounting for the income taxes related to a business combination. A colleague of yours hands you some papers with guidance on how to complete the task. Unfortunately, you see some terminology that you are unfamiliar with.

5. A friend from a software company calls you and asks how to treat the following situation: His company is exchanging a license of its software to a customer in exchange for a license to the customer’s technology (i.e., a non-monetary transaction). He wants to know how to record this accounting transaction.

Paper For Above instruction

The guidance provided by the Financial Accounting Standards Board (FASB) through its Accounting Standard Codification (ASC) is essential for addressing a wide range of accounting issues. Each scenario described requires referencing specific ASC topics that provide the authoritative guidance applicable to the situation.

In the first scenario concerning deferred revenues recognized by a cable television company, ASC Topic 606, Revenue from Contracts with Customers, is the primary source. Specifically, Subtopic 606-10-25-1 discusses the recognition criteria for revenue, which include the proper timing and measurement of deferred revenues, such as hookup revenues. The standard emphasizes the importance of identifying performance obligations and determining whether revenue is recognized when control of the goods or services is transferred to the customer.

The second scenario involves the recognition of revenue where the buyer has the right to return products. ASC Topic 606, Subtopic 606-10-25-13, addresses variables in transaction price, including rights of return, and emphasizes the need for companies to estimate and record returns to ensure revenues are not overstated. Additionally, ASC Topic 605-15-25 provides historical guidance, although ASC 606 supersedes it for revenue recognition matters involving returns.

For the third situation involving valuation of liabilities in a film entertainment company, ASC Topic 420, Exit or Disposal Cost Operations, and ASC Topic 275, Financial Reporting of Interests in Insurance, provide relevant accounting guidance. More specifically, ASC 420-10-25-1 discusses measurement and recognition of liabilities upon initial recognition, and ASC 410-20-25-1 addresses costs associated with exit or disposal activities, which may be relevant if the liability involves a future obligation to exit or dispose of assets.

The fourth scenario relates to accounting for income taxes in a business combination. ASC Topic 740, Income Taxes, is the authoritative guidance here, particularly Subtopic 740-10 which outlines recognition and measurement of deferred tax assets and liabilities, and Subtopic 740-20 that covers accounting for uncertain tax positions. This helps clarify the treatment of complex terms generally encountered in tax guidance related to acquisitions.

Lastly, the situation involving a non-monetary exchange between a software company and a customer is governed by ASC Topic 845, Nonmonetary Exchanges. Specifically, Subtopic 845-10-30 discusses the recognition and measurement of non-monetary exchanges, focusing on whether the transaction involves commercial substance and how to determine the fair value of exchanged assets to record proper gains or losses.

In summary, each scenario points to specific ASC topics that provide authoritative guidance on how to recognize, measure, and disclose accounting information appropriately. Accurate referencing ensures compliance with GAAP and enhances the reliability of financial reporting.

References

  • Financial Accounting Standards Board (FASB). (2023). Accounting Standards Codification (ASC). Retrieved from https://asc.fasb.org
  • FASB. (2014). ASC Topic 606, Revenue from Contracts with Customers.
  • FASB. (2010). ASC Topic 605, Revenue Recognition.
  • FASB. (2023). ASC Topic 420, Exit or Disposal Cost Obligations.
  • FASB. (2023). ASC Topic 740, Income Taxes.
  • FASB. (2023). ASC Topic 845, Nonmonetary Transactions.
  • Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2019). Financial Accounting Theory and Analysis: Text and Cases. Wiley.
  • Barth, M. E., & Landsman, W. R. (2010). How Did Financial Reporting Contribute to the Financial Crisis? European Accounting Review, 19(3), 399-423.
  • Leone, A. J. (2017). Understanding the FASB’s Accounting Standards Codification. Journal of Accountancy, 223(2), 45-50.
  • Penman, S. H. (2012). Financial Statement Analysis and Security Valuation. McGraw-Hill Education.

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