Case ID: 4011     Solution ID: 12168     Words: 1143 Price $ 45

Biovail Corporation Revenue Recognition and FOB Sales Accounting Case Solution

Case Solution

An English-language PDF of this Brief Case in an academic course pack will allow the students with the opportunity to buy an audio form as well. Biovail Corporation, a primary Canadian pharmaceutical business that is listed on the New York Exchange, revealed that it will not be able to meet its quarterly earning target by $24 to $45 million. The shortcoming of $10- $15 was put off on a truck mishap which involved an order that left its building on the last day of the quarter. The case was eventually indicted by the US Security and Exchange commission (SEC). The case is pivoted on the core question of profit identification and how the company should have recorded its sales ( FOB company and FOB destination). However, it has abundant information to encourage the learning of supplementary concepts about ethics of earning management. For instance, the case looks into the stock evaluators’ response to the announcement, investigates the amount of the product that was present in the truck; considers the extent to which the company stood against the evaluator who deteriorated the company’s stock and sheds light in the part played by SEC in law implementation. 

Excel Calculations

Questions Covered

How many truckloads of product are actually required to carry $10 million of product?  Show your calculations.

How should the company recognize revenue based upon the two possible FOB contract structures mentioned in the case?  Why?

How does the accident affect the stated revenues under the different FOB contract structures?  Explain your reasoning.

Are you concerned about the company’s treatment of analysts who cover the company’s stock?  Would you want to be an analyst covering this company?  Why?