Academic journal article Journal of the International Academy for Case Studies

Revenue Recognition at Ingelheim Sustainability Consultants-A Case Exploring the Effect of the New Converged Standard

Academic journal article Journal of the International Academy for Case Studies

Revenue Recognition at Ingelheim Sustainability Consultants-A Case Exploring the Effect of the New Converged Standard

Article excerpt


The primary subject matter of this case deals with the new revenue recognition standard issued jointly by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), which once effective will supersede both U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) on all revenue recognition-related issues. The primary objective of this case is to help students learn and understand the major provisions of the new revenue recognition standard and explore the potential effect on the financial statements of a service provider. Secondarily, the case explores potential ethical considerations that may arise for accounting professionals implementing the new standard.

The case has a difficulty level of three to four and can be taught in about 40 minutes. Approximately two hours of outside preparation are necessary to fully address the suggested case-specific, research, and ethics questions which are largely independent, providing instructors with considerable flexibility. The case can be utilized in an Intermediate Accounting course to reinforce the revenue recognition-related concepts and issues discussed in class. It can also be used in an advanced level course focusing primarily on the research components or in an accounting ethics course focusing primarily on the related ethical issues.

Using this case can enhance students' technical, analytical, research, and communication skills and may provide opportunities for discussing ethical considerations in the context of revenue recognition and the implementation of the new comprehensive accounting standard. Furthermore, the case also provides students with some insights into sustainability consulting, which represents a rapidly expanding area with continually increasing involvement by and enhanced opportunities for accounting professionals.


After years of collaboration, two exposure drafts, and extensive due process, in May 2014, the FASB and the IASB issued their new accounting standard on revenue recognition. The U.S. GAAP version of the converged standard, Accounting Standards Update No. 2014-09, which is entitled "Revenue from Contracts with Customers," will be integrated into the FASB Accounting Standards Codification (ASC) topic No. 606 and supersede all currently existing GAAP on revenue and revenue-related topics (FASB, 2014). ASU 2014-09, which includes several appendices and exceeds 700 pages, is quite complex and may significantly affect revenue recognition for many entities.

This case deals with a fictitious midsize privately-held company that provides comprehensive sustainability-related consulting services to clients. Sustainability, which is defined as preserving resources for future generations while creating value for current generations, is an important aspect of many organizations' operations (U.N., 1987). Sustainability falls into three broad areas--environmental (ecological), social, and financial sustainability. The company background included in this case provides students with the opportunity to consider revenue recognition-related issues under the new revenue standard in the context of an industry that is enjoying rapid growth and increasing involvement by accounting professionals, both in the U.S. and globally. The specific revenue recognition-related issues addressed include long-term contracts, bundled services, variable consideration, and discounted future services; which represent issues that tend to require additional consideration under the new standard.

This case may enhance students' understanding of major changes to revenue recognition. The case explores the effects of changes to revenue recognition on the financial statements as well as related ethical considerations, which are critically important to future accounting and business professionals. In addition, the case may help students gain some insights into a growing industry which enjoys increasing involvement by accounting professionals. …

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