Читать книгу Revenue Recognition - Renee Rampulla - Страница 41

The following example illustrates collectability of consideration as described in step 1:

Carl Construction, a real estate developer, enters into a contract for the sale of a building for $1 million. The customer, Neilson Enterprises, intends to open a restaurant in the building. The building is located in an area where new restaurants face high levels of competition and Neilson Enterprises has little experience in the restaurant industry. Neilson Enterprises pays a nonrefundable deposit of $50,000 at the inception of the contract and enters into a long-term financing agreement with Carl Construction for the remaining 95% of the promised consideration.

The financing agreement is provided on a nonrecourse basis, which means if Neilson Enterprises defaults, Carl Construction can repossess the building but cannot seek further compensation from Neilson Enterprises, even if the collateral does not cover the full value of the amount owed.

Does Carl Construction have a contract with Neilson Enterprises in accordance with FASB ASC 606? (As a reminder, in this example, Neilson Enterprises entered into the financing arrangement with Carl Construction with the intent of repaying the loan from the cash flow of the restaurant and has no other income or assets with which to repay the loan.)