According to the FASB ASC Standards, Pinkman Company has the mandate of recognizing the contract as separate sources of revenue. The contracts consist of different deliverables that need to be reflected in the financial statements differently. Based on the revenue recognition principle (605-35-25-8), the company should identify the two contracts as separate in order to depict the actual transaction of the goods and services in the agreement. The contracts do not qualify to be negotiated as a package because it is not within the required time frame. In addition, they are not of the same economic environment and neither do they interrelate. Lack of a substantial common price or cost would assist in working on the contract as single projects.
According to the FASB ASC 605-35-25-8, Pinkman has the role of identifying the performance obligation and the contracts with Saul Company. It has the right and duties of determining the preferred transaction prices with all its customers in accordance with their preferences. The action of allocating the different prices to the contract are within the FASB standards that states that the concern parties are entitled the responsibilities of allocating transactions prices to the certain performance obligation in a given contract. These would give room for the company to recognize the generated revenue in a given financial period ((FASB, 2009).
The amendment of the ASU 2014-09, Pinkman and Saul Company has to evaluate the appropriate ways to recognize the revenue. Therefore, it is prudent for Pinkman Company to record the contracts separately. The financial statement needs to reflect separate transactions prices as indicated in the contracted. The FASB ASC has well-defined principle guide the company on how the to recognize the different contracts. In addition, it shows or state how the company should reflect different transaction on the financial statements.
References
Financial Accounting Standards Board. (2009). Accounting Standards Update 2009-13 Revenue Recognition (Topic 605) Multiple-Deliverable Revenue Arrangements a Consensus of the FASB Emerging Issues Task Force, 1-50. Retrieved February 23, 2016, from https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwjY-K_r44zLAhVDUBQKHfK8BO4QFggdMAA&url=https://asc.fasb.org/imageRoot/62/6844362.pdf&usg=AFQjCNFbsgPOCCHdmEtkqIGgEiRg_-qafw&cad=rja.
