As per your request, I have prepared an analysis on when different contracts entered into with the same entity should be treated as separate contracts and when they should be treated as a single arrangement with multiple deliverables. When an entity enters into contracts with the same organization at around the same time, for the purpose of revenue recognition the contracts are assumed to have been negotiated as a single package with multiple deliverables instead of separate contracts. Since Pinkman Company negotiated the two contracts with Saul Company on the same date, they are assumed to have been negotiated as a single package and should be treated as a single arrangement with multiple deliverables (FASB, 2016, ASC para. 605-25-25-3).
Pinkman being the vendor should recognize the receptions desk and the nameplates as separate deliverables in the arrangement at the inception of the contract and as they deliver each of the items in the arrangement (FASB, 2016, ASC para. 605-25-25-4). Because the arrangement has multiple deliverables, the delivered items will be considered as separate accounting units if they satisfy the following two criteria:
The deliverables have value on a standalone basis, in that the vendor or the buyer can resell the delivered items
The arrangement confers the vendor the right of return over the delivered item, and delivery of the undelivered items are considered likely and in substantial control of the vendor (FASB, 2016, ASC para. 605-25-25-5).
Since the supply of the reception desk and nameplates to Saul Company satisfy both of the criteria above, Pinkman should therefore recognize the items as separate accounting units.
Feel free to call me should you have any further questions.
Reference List
Financial Accounting Standards Board (FASB). (2016). Revenue Recognition. Retrieved March
06, 2016, from https://asc.fasb.org/viewpage?ovcmd=goto
