Stanley And Sons Case Summary

Introduction.

In this case study in which Stanley and Sons Inc., (the company) entered into a supply management contract with Tadduni Partners (customer) aligns with accounting standards for revenues from contracts with customers, Financial Account Standards Board (FASB) Accounting Standards Topic 606.

Case background.

The contract is outlined in contractual details for the customer to provide spare parts, management services, resource procurement, repair, transport and deliver parts to warehouse. There could be economic impact on the customer if by chance they order spare parts directly from the vendor. Hence, if this occurs the company is not financially obligated or liable because such consideration would be outside of the contractual agreement.

Through the process of the company purchases spare parts directly from vendors and it should be noted that although the company purchased spare parts according to the agreement, the customer is not obligated or committed to purchase the parts. Reason being and considered in the contract, the customer is not involved in the purchasing process. Therefore, the boundaries of both parties are clearly spelled out within the contract. In applying relevant accounting guidance FASB issued (Accounting Standards) covering revenue from contracts with consumers Topic 606. As it pertains to this case study below are topics in some degree highlighted in Topic 606.

• Revenue and expense recognition for freight services in processes.

• Revenue and expenses are contractually established as it relates, for example reimbursements of obsolete parts in which the customer will reimburse the company at 50% of cost per this case study.

• The accounting of shipping and handling fees of cost. As stated in the contract, when spare parts are purchased by the company the vendor ships the spare parts directly to the customers warehouse. However, the customer does not take ownership until a purchase order is

It governs in a way to supplying Just-In-Time inventory, management services that includes procurement, repair, transportation, delivery are warehouse management. For example, if the customer decided to purchase more parts outside the contract with the company, it would be exercising and alternative which again is outside the contractual agreement. The company has the latitude in vendor selection and the negotiating responsibility of pricing with vendors. This should be considered a flexible alternative that can be lucrative to the company, as they would benefit from bonuses noted in the details of the case study. In this case, it would be necessary to record all transactions to ensure accuracy in the amount of bonuses and transparency. As for disclosure noted in the case study, purchases of spare parts made in advance of receiving purchase order from the customer is normal business. Whereas, the company is obligated to pay vendors within the agreed upon payment terms. For such transactions to go smoothly full disclosure is required. The overall objective of disclosure is in this case is the foundation of ethical business practices, transparency which fosters responsiveness from all parties