Essay on Boston Automation Systems, Inc.

Words: 1383
Pages: 6

Osman Harac

Boston Automation Systems, Inc.

1. What is (are) Boston’s current revenue recognition policy (ies)?

As of 1999 annual report, the company recognizes the revenue upon shipment. But this will change with SAB 101. The company will wait until the delivery and customer acceptance to recognize the revenue In addition to that they also calculate the estimated warranty costs. The company recognizes the service revenues as the services are provided (not before the services are provided) The Company does not count in service revenue with other revenues (revenues from product sales and installation, maintenance) For long term certain contracts, the company uses percentage of completion method for revenue recognition.
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In addition to that the division should wait for customer acceptance.

Specialty Semiconductor, Inc.

This customer also wants the equipment to be integrated into a larger production line but this production line is not a complex one. The division thinks that the equipment will fit into the production line very well. However the customer is not obligated to pay before the installation. The division should wait to recognize the revenue until the end of the installation. After this the customer will be obligated to pay.

Micro Applications, Inc.

The division could recognize the revenue upon delivery because the customer was obligated to pay 100% of the fee no later than 90 days after delivery regardless of whether installation had occurred. And also the production line is not complex and the division thinks that the equipment will fit into the production line very well.

XL Semi, Inc.

The Advanced Technology Division also manufactured equipment to produce semiconductor wafers. This equipment was complex and expensive ( $500,000 to $10 Million per unit) XL Semi, Inc. ordered an equipment which is $9 Million. The division tested the equipment and was confident when the equipment shipped that it would ultimately perform very well. The division used its own engineers to dissemble and assemble the equipment. The customer asked the division to delay the final installation. The division should recognize only the 90% of the revenue