RSM220H1 Chapter 6: Self-Study Exercises - Chapter 6.docx
Document Summary
Exercise 6-3 (15-20 minutes) (a) customer acceptance provisions, such as extended trial periods and goods shipped subject to approval, are examples of concessionary terms. Concessionary terms may create additional performance obligations, and if the concessionary terms are more lenient than usual, they may complicate the accounting. Customer acceptance provisions that are more lenient than usual may mean that risks and rewards of ownership have not yet transferred to the customer, or that the vendor has continuing involvement in, or effective control over, the goods sold. It would be appropriate to recognize the sale as long as a reasonable estimate of sales returns could be accrued at the same time. These specifications are not subjective and are instead very specific to the customer"s needs. If the company advertises that customer satisfaction is guaranteed , a customer may expect that the company will accept returns even beyond the 30-day contractual refund period in order to honour its advertised statement.
