Essay --

Under U.S. GAAP, entities contribute generally pick out revenue enhancement when it is realized or realizable and earned. 1.Revenue can be recognized when it is realized or realizable. For revenue to be realized, a company must receive prompt payment or claims to hard currency in exchange of goods, services, or other assets. Similarly, for revenue to be realizable, the firms goods, services, or other assets must be exchanged for other assets that are readily convertible to known amounts of notes or claims to cash (605-10-25-1). This means that the entitys assets were not exchanged for cash or claims to cash, but instead, for another companys assets, such as short-term investments and government securities.2.Revenue can be recognized when earned. Entities can earn revenue if the firm has substantially accomplished what it must do to be entitled to the benefits represented by the revenues (605-10-25-1). For example, when companies substantially completed (a) prep of profe ssional services, (b) delivery or production of goods, or (c) other activities that bring into being its ongoing major or central operations, revenues is earned. Issue 2 ( vertex and Hold)Question One of the issues faced by TerraSure relates to revenue fruition of complete goods that have not yet been delivered to customers due to inadequate repositing space in customers warehouses. TerraSure has engaged in two different methods to deal with this situation. With the first method, TerraSure segregates the inventory within its own finished goods warehouse. In the second method, TerraSure ships customers inventory to a trey party warehouse, where customers directly pick up their inventory. Background Regarding bill and adhere inventory, the SEC Staff Guidance states that these ... ...ordance with the terms of the recording, has been delivered or is available for immediate and unconditional delivery.3.The license period of the arrangement has begun and the customer can put down its exploitation, exhibition, or sale.4.The arrangement fee is fixed or determinable.5.Collection of the arrangement fee is reasonably assured (926-602-25-1)Responses Since TerraSure does not allow its customers to show the films until by and by its promotional activities begin, it cannot recognize revenue at the point of sale. To correctly recognize revenue for the film licensing contracts, customer must have all rights to exploit, exhibit, or sale (926-602-25-10). Even though the film is delivered to the customer, TerraSure must recognize revenue from licensing agreements not at the point of sale, but after the marketing department begin its promotional activities.