Essay --

1. The SEC issued SAB No. 101, which provides guidance on recognizing, establishing and disclosing tax revenue in monetary statements. SAB No. 101 is based on the principle that in companies fiscal reporting, revenue should not be recognized until it is realized or manageable and earned. Before revenue is recognized, the following criteria and conditions moldiness be satisfied notes that generally accepted accounting principles requires the following conditions to be satisfied1)Persuasive evidence of an organisation must exist 2)Delivery must have occurred or run been rendered3)The traffickers price to the buyer must be fixed or determinable4)The collectability should be reasonably assured. 2. Longeta record $5.8 million in revenue for the year ended September 30, 2009 out of the actual shipment of softw are program product. The shipment of the software product to Magicon was made prior to the year-end, so Longeta enured the revenue associated with the cut-rate sale of soft ware as a current sale on the income statement. On the other hand, Longeta recorded the remaining $1.2 million as deferred revenue disposed that Longeta was liable to provide software oppose services in the future periods. Since the delivery of support services had not occurred, Longeta recorded the portion of the contract related to support services as deferred revenues. For the support services to be provided over the next 12 months, Longeta would record the present deferred revenue as a current liability on the commensurateness sheet. If there were a commitment to provide services after 12 months, Longeta would record deferred revenues as a long-term liability on the end sheet. 3. The separate letter issued by the vice president of sales exhibited that uncomplete Longeta nor Magicon had agreed to the term... ... transaction with Magicon has violated GAAP related to revenue recognition. The reasons are listed as below1)There was no evidence showing that an arrangement existe d. Neither Longeta nor Magicon had reached apprehension on the terms and conditions of the sale.2)There was no denotation that the earnings process was complete or nearly complete. The separate agreement gave Magicon the right to cancel the order and relevant obligations. It could be inferred that no re-sentencing of assets has taken place, since Magicon did not make any commitment to provide Longeta with anything. 3)Magicon was given the right to cancel its payments to Longta if no terms could be reached, which meant that no array would be generated.In sum, neither the recording of the $5.8 million in revenue nor the $1.2 million in deferred revenue was in accordance with the principles of GAAP.