Does Sarbanes-Oxley preclude corps from recognizing revenue at shipping point end with FOB Origin terms?
The basic fundamental of revenue recognition is Statement of Accounting Concept (CON) 5, which states that revenue should not be recognized before both the following occur: 1) Revenue is realized or realizable (products / services exchanged for cash or claims to cash) 2) Revenue is earned (performance obligations are substantially complete). CON5 establishes fundamental concepts but there is no overarching revenue recognition standard building on this. Therefore, there is a great deal of authoritative literature developed on an ad-hoc basis. SAB104 which was drafted by SEC buids on CON 5 fundamental which states SEC’s views that revenue is not realized and earned until all of the following criteria are met: 1) Persuasive evidence of arrangement exists 2) Delivery has occurred or services have been rendered 3) Seller’s fee is fixed and determinable 4) Collectibility is assured. In your case, clearly the matter being disputed is number 2 – “delivery has occurred or services have been ren
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- Does Sarbanes-Oxley preclude corps from recognizing revenue at shipping point end with FOB Origin terms?
