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0 CASES REVENUE RECOGNITION

CASE 1
1. A car dealership is in the business of selling new and used car. The car

o0 deallership has demonstration cars available that can be used by potential

customers for test drives. The car are used for more than one year and then
sold as used. The dealership sells both new and used cars. Does the sale
represent the sale of fixed assets, as the car used by the dealership for the
purpose of securing sale, or is the sale of the car the sale of an item of

4 inventory resulting in recording of revenue, as the dealership is in the business

of selling new and used cars?
2. Goods costing Rp.5 millions are purchased in year 1. A customer orders the

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goods and pays Rp.2 millions in advance for the goods in year 2, and the
goods are delivered and the balance of Rp. 6 millions is paid in year 3. How do
you record the transaction in year 1-3? When should revenue be recognized?
3. Entity A manufactures and sells transformers. The transformers are shipped to

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the buyer by sea, but in order to transfer risk related to the shipment of the
transformers, entity A purchases insurance coverage for the goods while they
are in transit from the factory o the buyers premises. The legal title passes
when the goods arrive at the buyer’s premises one month later. When should

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the Entity A recognize revenue for the transformers?
4. Entity A operates in a country where it is commonplace to retain title to goods
sold as protection against non payment by a buyer. The retention of the title
will enable entity A to recover the goods if the buyer default payment.

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Subsequent to the delivery of the goods to the buyer (entity B), entity A does
not have any control over the goods. Entity B makes payments in accordance

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with the normal credit terms provided by entity A. Product liability is assumed
by entity B. Settlement is due 90 days after delivery. Has the entity A sold the
goods to the buyer (entity B)?

r 5. An entity A sold customized software. It includes development, installation,

inspection, and two year maintenance. Customer pays entity A at the each

td stage based on the negoatited contract. When should enity A recognize the
revenue?

Case 2

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Oscar Industries has three operating divisions: Bale Construction Division,
Portman Publishing Division and Firth Securities Division. Each division
maintains its own accounting system and method of revenue recognition.
Bale Construction Division

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During the fiscal year ended Nov. 30, 2010, Bale had one construction project in
process. A$30,000,000 contract for construction of a civic center was granted on
June 19, 2010, and construction began on August 1, 2010. Estimated costs of
completion at the contract date were $25,000,000 over a2-year time period from
the date of the contract. On Nov. 30, 2010, construction costs of $7,200,000 had

co been incurred and progress billings of $9,500,000 had been made. The
construction costs to complete the remainder of the project were reviewed on
Nov. 30, 2010, and were estimated to amount to only $16,800,000 because of an

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expected decline in raw materials costs. Revenue recognition is based upon a
percentage-of-completion method.
Portman Publishing Division
The Portman Publishing division sells large volumes of novels to a few book
distributors, which in turn sell to several national chains of bookstores. Portman
allows distributors to return up to 30% of sales, and distributors give the same
terms to bookstores. While returns from individual titles fluctuate greatly, the
returns from distributors have averaged 20% in each of the past 5 years. A total
of $7,000,000 of paper-back novel sales were made to distributors during fiscal
2010. On Nov. 30, 2010 (the end of the fiscal year) $1,500,000 of fiscal 2010
sales were still subject to return privileges over the next 6 months. The remaining
$5,500,000 of fiscal 2010 sales had actual returns of 21%. Sales from fiscal 2009
totaling $2,000,000 were collected in fiscal 2010 less 18% returns. This division
records revenue according to the method referred to as revenue recognition
when the right of return exists.
Firth Securities Division
Firth Securities Division works through manufactures’ agents in various cities.
Orders for alarm systems and down payments are forwarded from agents, and
the division ships the goods f.o.b. factory directly to customers (usually police
department and security guard companies). Customers are billed directly for the
balance due plus actual shipping costs. The company received orders for
$6,000,000 of goods during the fiscal year ended Nov. 30, 2010. Down payments
of $600,000 were received, and $5,200,000 of goods were billed and shipped.
Actual freight costs of $100,000 were also billed. Commissions of 10% on
product price are paid to manufacturing agents after goods are shipped to
customers. Such goods are warranted for 90 days after shipment, and warranty
returns have been about 1% of sales. Revenue is recognized at the point of sale
by this division.
Instructions
(a) There are a variety of methods of revenue recognition. Define and describe
each of the following methods of revenue recognition, and indicate whether
each is accordance with PSAK 23.
(1) Point of sale
(2) Cost-recovery
(3) Percentage-of-completion
(b) Compute the revenue to be recognized in fiscal year 2010 for each of the
three operating divisions of Oscar Industries in accordance with PSAK 23.

Case 3
(a) What are major differences between IFRS (or PSAK 23) and US GAAP as
regards revenue recognition practices?
(b) Find an audited full set financial statement of Indonesian company for the
year ended December 31, 2009. How did the company recognize its
revenue? Which accounts in that company were affected by the selected
revenue recognition method?
Jawaban Kasus:

Case 1
1. Aktiva tetap karena nilainya menyusut.
2. Pada tahun ketiga baru bisa akui pendapatan yaitu 8 juta.
3. Pengakuan pada saat penyerahan barang ke pembeli (FOB destination).
4. Pada saat penyerahan barang (karena kondisinya normal) karena sudah
ada transfer manfaat dari penjual ke pembeli.
5. Sesuai dengan tahapannya (menggunakan metode proporsional)

Case 2
Construction Bale (Percentage of completion method)
Estimated : 7.200.000
Total : 24.000.000
Percentage : 7.200.000/24.000.000 = 30%
Revenue to date = 30% x 30.000.000 = 9.000.000

Portman divisions :
Sale return = 14.000.000
20 % x 7.000.000 (menggunakan nilai 20% karena kalo pake 30% terlalu besar
returnnya nanti) dimana nilai 20% adalah yang benar-benar terpakai
cash 7.000.000

sales 7.000.000

Sales return 1.400.000

Sales return allowance 1.400.000 (benar-benar terjadi)

Firth Securities Division

5.200.000
Case 3 : jawabannya ada di paper