There are two possible FOB contract structures mentioned in case, namely FOB shipping level and BALLOON destination. FOB shipping point means that Biovail would have acknowledged the income the same day time it transported as the sales set up was happy, service made, and a determinable sales price founded. Conversely, FOB destination probably would not have allowed Biovail to realize the income until the shipment reached the distributer. In such a contract support is certainly not rendered and, therefore , revenues are not earned until shipment arrival. Based upon this case, the company should understand revenue by way of FOB shipping point because " The agreement between Biovail plus the Distributer given that title to, and likelihood of loss regarding, the product probably would not have passed to the Distributer until the product was delivered to the Distributer's facility. With this scenario, applying generally acknowledged accounting principles (GAAP) requirements, revenue may not be recognized as the seller has not carried out everything essential under the revenue agreement. In this specific product sales agreement, name and risk of the delivery remains the seller's right up until received by the buyer. Consequently , Biovail is liable for shipping and delivery incidents. Additionally it is important to be aware here that Biovail's inventory is listed around the NYSE and must abide by U. H. GAAP. While GAAP is usually not rules and does allow for corporate discretion, Biovail's extreme accounting procedures should produce concern. Whilst GAAP does allow companies flexibility in certain areas (e. g. estimations regarding time and future costs), Biovail might venture outside of this overall flexibility and violate GAAP if it were to purposely recognize earnings contracted underneath FOB destination as soon as the shipment left the docks. In this instance, it would incorrectly affect this kind of reports since revenues and earnings every share pertaining to the third and fourth sectors. •Effect about Stated Revenues
FOB shipping point could have allowed...