The FASB concluded that if a company sells its product but gives the buyer the right to return the product, revenue from the sales transaction shall be recognized at the time of sale only if all of six conditions have been met. Which of the following is not one of these six conditions?
A) The amount of future returns can be reasonably estimated.
B) The seller's price is substantially fixed or determinable at time of sale.
C) The buyer's obligation to the seller would not be changed in the event of theft or damage of the product.
D) The buyer is obligated to pay the seller upon resale of the product.

Question

Quizplus · Accepted Answer

The buyer's obligation to pay the seller upon resale of the product is not one of the six conditions listed by the FASB for recognizing revenue from the sale of a product with the right of return. The six conditions are:

1. The seller's price is substantially fixed or determinable at the time of sale.
2. The buyer has paid the seller, or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product.
3. The buyer's obligation to the seller would not be changed in the event of theft or damage of the product.
4. The buyer acquiring the product for resale has economic substance apart from that provided by the seller.
5. The seller does not have significant obligations for future performance to directly bring about resale of the product by the buyer.
6. The amount of future returns can be reasonably estimated.

The FASB Concluded That If a Company Sells Its Product