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Manini Manufacturing
1. Is the arrangement a multiple element arrangement? If so, what elements of the arrangement would qualify for, and be accounted as, separate units of accounting?
• Yes, it is a multiple element arrangement since it is a sales arrangement that involves delivery of multiple products and services over extended period of time.
• The following would quality for separate units of accounting:
a. Equipment
b. Installation
c. Maintenance & Support
2. If the arrangement consists of more than one unit of accounting, how should the arrangement fee be allocated between the separate units of accounting? Assume Manini early adopted the provisions of EITF Issue No. 00-21, Revenue Arrangements With Multiple Deliverables. How much revenue, if any, should be recognized in the fiscal year ended February 28, 2003 and 2004, respectively?
• In 2003, revenue recognized = $50,000 + $150,000 + $300,000 for equipment.
• In 2004, revenue recognized = $500,000 for installation services.
In 2004, revenue recognized = $50,000 for maintenance and support services.
3. How would your responses to Issues 1 and 2 change, if the customer had a specific right of return such that the customer may receive a refund of amounts paid upon contract signing, delivery of test data, and delivery of equipment, if Manini fails to complete the installation process?
• If specific right of return exists in contract as described in question above, the following would quality for separate units ...