EITF 00-21 Essay

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In December 2003, the SEC issued Staff Accounting Bulletin No. 104, "Revenue Recognition", which supersedes SAB 101 on the same subject matter. The primary purpose of such an issuance is to rescind the accounting guidance contained in SAB 101 related to multiple-element revenue arrangements that was superseded as a result of the issuance of EITF 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables" and to update certain SEC accounting guidance to conform to GAAP pronouncements issued subsequent to the release of SAB 101. Prior to EITF 00-21, GAAP lacked a comprehensive definition of a deliverable or a separate unit of accounting and did not include consistent segmentation provisions or guidelines to determine when and how to divide an arrangement into separate units of accounting, and how to measure and allocate the total sales price to the separate units of accounting. To relate this issue to our case, if Manini Manufacturing does not adopt EITF 00-21, they may be able to upfront account all of the revenues upon satisfaction of all criteria set out by SAB 101. On the contrary, if Manini Manufacturing fails to meet all criteria for recognizing the revenues, they may have to defer it to the next fiscal year. SEC staff noted that EITF 00-21 only addresses the issue of whether multiple elements in an arrangement should be accounted for separately, or together as a single accounting unit. However, there is no guidance that is included in EITF 00-21 that describes how and when revenues from the entire arrangement should be recognized. SAB 104 addresses the issue by stating that if an arrangement must be accounted for as a single accounting unit, the pattern of revenue recognition for the entire arrangement generally should mirror the pattern for the last item to be delivered. For example, assume that an arrangement provides for the delivery of

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