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mjh28

Revenue Recognition

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Hello,

We have a disagreement in our finance department, and I can't find a definitive answer in any FAR clauses (or have found evidence for both cases). If we have a contract to sell supplies to the government, with "Inspect at Origin, Accept at Destination" terms, do we need to wait for the receiving report and/or invoice to be accepted in WAWF/iRAPT before we recognize revenue? Or does the shipment just need to arrive at the customer's dock? Assume all material has already passed inspection at origin. Does anyone have a firm answer on this, and is there a specific regulation/clause that spells this out definitively? Industry is defense, if that matters.

Potentially applicable FAR clauses:

52.246-16 Responsibility for Supplies

52.247–34 F.o.b. Destination, section b4.

FAR Subpart 46.5

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You will not find the answer in the FAR. You will find the answer in authoritative AICPA guidance. SAB 104 or whatever the kids are calling it these days.

The answer, as I recall from days long gone, is that you recognize revenue when you have performed all the actions required by the contract. From my point of view, you have performed all required actions when the item has arrived at the customer's receiving dock, since it was already inspected. However, I understand there's a risk that the item may have been damaged in transit, in which case ...?

Whether you need "proof" that all actions were taken would seem to be a matter for your Controller and your external auditors to discuss.

To reiterate: you will not find your answer in the FAR.

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H2H is correct.  There is no requirement that FAR accounting concepts comply with GAAP.  However, the FAR, including the CAS, generally complies with GAAP in regard to cost accounting.  It does not contain any guidance on revenue recognition.

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I'm late in replying, but thank you both for your contribution/direction. I'll try find the section in the AICPA Guidance that addresses this,

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