In: Accounting
Existence of a contract (LO 3-2)
Robertson, Inc., manufactures metal products. As part of the manufacturing process, metal shavings are produced. Rather than disposing of the metal shavings, Robertson sells them to a metal recycler.
Required:
Draft a memo discussing whether Robertson’s sale of metal shavings to the recycler is subject to ASC Topic 606?
ASC 606 provides accounting guidance related to revenue from contracts with customers. The guidance applies to all entities and to all contracts with customers
ASC 606-10 provides the following overview of how revenue is recognized from an entity's contracts with customers:
The core principle of this Topic is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognizes revenue in accordance with that core principle by applying the following steps:
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In addition, ASC 606-10 contains guidance on the disclosures related to revenue, and notes the following:
This Topic also includes a cohesive set of disclosure requirements that would result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. Specifically, Section 606-10-50 requires an entity to provide information about:
Therefore according to ASC 606 "Robertson’s sale of metal shavings to the recycler is subject to ACS 606" |