Solvgen Case Study

Memorandum To: Audit Engagement Team Manager From: Zach Halstead, junior Auditor take: Due Diligence on SolvGen Inc. mesh: October 4, 2011 After reviewing some(prenominal) the research and development (R& vitamin A;D) transcription and the freedom and diffusion sympathy between SolvGen Inc. and C areway Pharma Inc., I sire grow to the following conclusions: Deliverables Discussion * In conformation with code 605-25-25, a deliverable must have objective entertain on a stand-al matchless soil. * The deliverable in this agreement is the selling of max instrument sy solutions which fall below the permit and distribution agreement. * The R& ampere;D agreement does non constitute a deliverable since Careway is barred to any of the findings of SolvGens R&D department, even in the detail of a SolvGen bankruptcy. * With away much(prenominal) access to R&D research, the agreement basically has no value to Careway on a stand-alone basis. milepost Payment Revenue Recognition * In accordance with codification 605-28-20, a milestone is achieved if the event would result in additional wagess beingness due to the vendor. * Therefore, the milestone payments cannot be recognise as tax revenue enhancement until the date of the first launch, when revenue is earned and more payment comes due to SolvGen from Careway.

* Since R&D does not set up a deliverable, the milestone payments are essentially an up-front payment for the license and distribution deliverable. * milestone payment revenue should then be spread out on a pro ra ta basis as products are distributed under t! he license and distribution agreement. Differences under IFRS? * Since the agreement has solely one deliverable, and the agreements went into effect at the same, no material expiration exists when comparing GAAP and IFRS. * However, under IFRS, one could record revenue up-front, mainly from the milestone payments. * This decision would stem from IAS-18, which states that revenue is recognised when future...If you want to get a full-of-the-moon essay, order it on our website: OrderCustomPaper.com

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