Accounting Research

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Title: Accounting Research
29 March 2015
The agreement is such that CMI does not have rights to return once the goods are delivered, while ALI also specifies cash on delivery. A number of bottlenecks hamper ALI’s efficiency when it comes to its operations, especially a backlog of orders and the fact that delivery and installation is during the December vacation, when most of its technicians are away on holiday.
The accounting issue relevant to the case of ALI is the correct recognition of the details related to the sales of the various components as an integrated system to CMI. Relevant components of the authoritative literature include factors such as revenue recognition and the recognition of the payments by CMI and incentives or offers.
When we look at this case, it is about a sales agreement where a number of goods are to be delivered, or in short, multiple deliverables. The most important thing here is to be able to determine if the sales agreement is going to treat the deliverables as multiple distinct parts, or a single unit. In a nutshell, after ALI considers this part of the agreement, it should additionally check on how arrangement consideration shall be measured and allocated to the separate units of accounting in the arrangement.
This is one thing that even ALI itself is concerned about, in its sales agreement with CMI.ALI should revis...