The focus of this case is to help students understand revenue recognition when a right of return exists. Revenue recognition when a right of return exists fits into the broader context of recognizing revenue from contracts with customers (ASC 606; FASB 2014c). The case and the accompanying questions are separated into two parts. Part 1 reviews the accounting for sales returns using Statement of Financial Accounting Standard (SFAS) 48, which was in effect at the time Medicis restated their financial statements (FASB 1981). SFAS 48 was later incorporated into ASC 605 (FASB 2014b; to facilitate student research, this case will use ASC 605 when referring to the prior guidance including SFAS 48). ASC 605 was later superseded by ASC 606. While this case took place under the prior revenue recognition guidance, the issues that caused problems for Medicis are equally applicable under the new ASC...
Revenue Recognition and Sales Return Issues at Medicis Corporation
We thank the editor, associate editor, and reviewers for many helpful comments that helped to improve this case.
Andrew D. Gross, Jeffrey Hemker, Jamie L. Hoelscher, Brad J. Reed, and Gregory Sierra, Southern Illinois University Edwardsville, Accounting Department, Edwardsville, IL, USA.
Please do not make the Teaching Notes available to students or post them on websites.
Supplemental material can be accessed by clicking the links in Appendix C.
Editor's note: Accepted by Valaria P. Vendrzyk.
Andrew D. Gross, Jeffrey Hemker, Jamie L. Hoelscher, Brad J. Reed, Gregory Sierra; Revenue Recognition and Sales Return Issues at Medicis Corporation. Issues in Accounting Education Teaching Notes 1 November 2022; 37 (4): 14–34. https://doi.org/10.5555/ISSUES-17-015tn
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