Question

Consult the FASB ASC system using the access information given in the Announcements page and summarize the relevant sections of the code for the requirements in CE 18-3, reproduced below: CE18.3 Describe the accounting for refund liabilities. Upload your report file here on or before Thursday, September 24.

Answer 1

The refund liability represents the amount of consideration that the company does not expect to be entitled to because it will be refunded to customers. The refund liability is remeasured at each reporting date to reflect changes in the estimate, with a corresponding adjustment to revenue.

refund liability means the amount the member may elect to withdraw from the former system under section 411.23.2. Commencing July 1, 1996, a vested member of an eligible retirement system who terminates employment covered by one eligible retirement system and, within one year, commences employment covered by the other eligible retirement system may elect to transfer the greater of the average accrued benefit or the refund liability earned from the former system to the current system. The member shall file an application with the current system for transfer of the greater of the average accrued benefit or the refund liability within ninety days of the commencement of employment with the current system.

The asset represents the entity’s right to receive goods back from the customer. The asset is initially measured at the carrying amount of the goods at the time of sale, less any expected costs to recover the goods and any expected reduction in value. The return asset is presented separately from the refund liability. The amount recorded as an asset should be updated whenever the refund liability changes and for other changes in circumstances that might suggest an impairment of the asset.