The document analyzes the revenue recognition of Microsoft, Amazon, and Tesla based on new FASB guidelines. Microsoft recognizes revenue based on short and long-term investments. Amazon recognizes revenue based on four criteria and discloses information to help users understand its calculations. Tesla recognizes automotive and energy storage revenue, creates deferred revenue for vehicle buybacks, and complies with ASC 606. All three companies follow FASB and GAAP regulations on revenue recognition in their financial statements.

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CLC Assignment: COMPANY ANALYSIS
Group 3
Professor Stephen Weiss
ACC. 371
January 31, 2021
Introduction
The GAAP provided new guidelines regarding revenue
recognition, in order to simplify the financial statements. The
objective of the new guidance is to establish the principles to
report useful information to users of financial statements about
the nature, timing, and uncertainty of revenue from contracts

2. with customers. This paper will discuss the revenue recognition
criteria of various companies and how they comply with rules of
FASB codification.
The Analysis
Microsoft Corporation: Microsoft corporation is the largest
company that deals with the manufacturing and sale of
electronic devices like iPhones, iPads, laptops and other extra
devices in the world. It is the leading company in the
production of personal computer software. Its financial
statements signify a good performance in the investment sector.
From the balance sheet, the short-term investments in the
financial year 2020 were $136,527, in 2019 the investments
were $133,819 and in 2018 the investments totaled to $133,768
this can be estimated to be 2.02%, 0.04% and 0.59% percentage
growth of the company from the previous years, (Warren et al,,
2020).
The notes show that the company has invested $150 in the
production of more units of the electronic devices supplied.
Investing in workforce and in the security exchange in the
purchase of share in the stock exchange. An approximate
amount of $100 was invested in the purchase of share and
reinvestment of dividends in 2019, (Mayes, 2020).
FASB which refers to the financial accounting standards board
has laid out new policies that ought to be followed by every
company. For instance, Microsoft corporation follows the
principle of impracticability in its operations as required by
FASB as it believes excessive costs are included in the
principle, (Tysiac, 2018, p.105). Additionally, the company
follows the exchanges productive assets which states that the
accounting of non monetary transactions should be based on fair
values of the assets. According to Microsoft corporation when
non-monetary transactions lack commercial substance, they are
exempted in accordance with FASB standards. Therefore,
Microsoft has made investments in the company in both short-
term and long-term investments and follows the FASB standards
correctly when preparing their financial statements.

3. Amazon: Amazon is the second most valuable company in the
United States trailing Apple. The company is worth over $1.7
trillion and continues to grow. Amazon recognizes revenue
when these four criteria are met, evidence of an arrangement or
contract exists, delivery has occurred or services have been
rendered, the selling price is fixed or determinable, and
collectability is assured (sec.gov). From there they determine if
they should report the revenue as gross sales and related costs
or the net amount as commission sales. When discount offers
are accepted by the customer the amounts are deducted from the
transaction price. Generally when the company is obligated in a
transaction the revenue is recorded as gross sales. These
amounts are determined by using a fixed percentage, fixed
payment, or combination of both. Product sales represent
revenue from sales of products and related shipping costs and
return allowances are estimated using past experiences
(sec.gov). The most complicated revenue to record are the prime
memberships because they offer a wide range of services.
Under GAAP regulations, all revenue cannot be recognized until
all parts of the contract are shipped. Amazon’s total revenue for
2019 was 280.5 billion up from 2018. Knowing this
information, will help the users of the financial statements by
helping them understand when the revenue is recognized and
how it is calculated. Amazon discloses all relevant information
in the financial statements and complies with all rules provided
for the FASB codification, so that investors and the public can
get a true idea of the financial standings of the company.
Tesla: Tesla is a company that manufactures, sells, designs and
develops high-performance fully electric vehicles. They also
manufacture, install and sell solar energy generation and energy
storage products. The revenue consists of automotive sales with
and without resale value guarantee, automotive leasing and the
leasing or sale of energy generation and storage. At the time of
revenue recognition, they reduce the transaction price and
record a sales return reserve against revenue for estimated

4. variable consideration related to future product returns.
Customers can exercise a buyback option in which the company
can resell the returned vehicle. This creates a deferred revenue
and is listed as a liability. The balance sheet shows a deferred
revenue for $1,258 on September 30, 2020 and $1,163 for
December 2019. Its total sales revenue which includes the
automotive sales, leasing and energy generation and storage
totaled $8,771 for 2020 and $6,303 for 2019. Listing the
deferred revenue allows the consumer to know what the
company assumes the likelihood of the buyback options. The
company makes these estimates by assessing the market value
and historical experience. Tesla has adopted ASC 606 since
2018. The FASB code for 606 is Revenue from Contracts with
Customers. The entity recognizes revenue to depict the transfer
of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services (FASB 606-05-
3).
Conclusion
Each of these companies have followed the rules of FASB
codification and GAAP regulations regarding recognizing
revenue on the financial statements. The new policies put in
place regarding revenue recognition help investors and the
public better understand the true financial health of these
companies, and has been beneficial to everyone involved.

5. References
Mayes, T. R. (2020). Financial analysis with Microsoft excel.
Cengage Learning.
Warren, C. S., Jonick, C., & Schneider, J. (2020). Accounting.
Cengage Learning.
Tysiac, K. (2018). 6 key areas of change for accountants and
auditors. Journal of Accountancy, 225(3), 57-63.
Amazon 10-K retrieved from:
https://www.sec.gov/Archives/edgar/data/1018724/00010187241
7000011/R9.htm
Tesla 10-
K,https://ir.tesla.com/node/20456/html#Notes_to_Consolidated_
Financial_Statemen
Tesla 10-
Q,https://ir.tesla.com/node/20456/html#Notes_to_Consol idated_
Financial_Statemen
FASB Codification,https://asc.fasb.org/section&trid=49130394
1
2
3

6. CLC Assignment: COMPANY ANALYSIS
Group 3
Professor Stephen Weiss
ACC. 371
January 31, 2021
Introduction
The GAAP provided new guidelines regarding revenue
recognition, in order to simplify the financial statements. The
objective of the new guidance is to establish the principles to
report useful information to users of financial statements about
the nature, timing, and uncertainty of revenue from contracts
with customers. This paper will discuss the revenue recognition
criteria of various companies and how they comply with rules of
FASB codification.
The Analysis
Microsoft Corporation: Microsoft corporation is the largest
company that deals with the manufacturing and sale of

7. electronic devices like iPhones, iPads, laptops and other extra
devices in the world. It is the leading company in the
production of personal computer software. Its financial
statements signify a good performance in the investment sector.
From the balance sheet, the short-term investments in the
financial year 2020 were $136,527, in 2019 the investments
were $133,819 and in 2018 the investments totaled to $133,768
this can be estimated to be 2.02%, 0.04% and 0.59% percentage
growth of the company from the previous years, (Warren et al,,
2020).
The notes show that the company has invested $150 in the
production of more units of the electronic devices supplied.
Investing in workforce and in the security exchange in the
purchase of share in the stock exchange. An approximate
amount of $100 was invested in the purchase of share and
reinvestment of dividends in 2019, (Mayes, 2020).
FASB which refers to the financial accounting standards board
has laid out new policies that ought to be followed by every
company. For instance, Microsoft corporation follows the
principle of impracticability in its operations as required by
FASB as it believes excessive costs are included in the
principle, (Tysiac, 2018, p.105). Additionally, the company
follows the exchanges productive assets which states that the
accounting of non monetary transactions should be based on fair
values of the assets. According to Microsoft corporation when
non-monetary transactions lack commercial substance, they are
exempted in accordance with FASB standards. Therefore,
Microsoft has made investments in the company in both short-
term and long-term investments and follows the FASB standards
correctly when preparing their financial statements.
Amazon: Amazon is the second most valuable company in the
United States trailing Apple. The company is worth over $1.7
trillion and continues to grow. Amazon recognizes revenue
when these four criteria are met, evidence of an arrangement or
contract exists, delivery has occurred or services have been

8. rendered, the selling price is fixed or determinable, and
collectability is assured (sec.gov). From there they determine if
they should report the revenue as gross sales and related costs
or the net amount as commission sales. When discount offers
are accepted by the customer the amounts are deducted from the
transaction price. Generally when the company is obligated in a
transaction the revenue is recorded as gross sales. These
amounts are determined by using a fixed percentage, fixed
payment, or combination of both. Product sales represent
revenue from sales of products and related shipping costs and
return allowances are estimated using past experiences
(sec.gov). The most complicated revenue to record are the prime
memberships because they offer a wide range of services.
Under GAAP regulations, all revenue cannot be recognized until
all parts of the contract are shipped. Amazon’s total revenue for
2019 was 280.5 billion up from 2018. Knowing this
information, will help the users of the financial statements by
helping them understand when the revenue is recognized and
how it is calculated. Amazon discloses all relevant information
in the financial statements and complies with all rules provided
for the FASB codification, so that investors and the public can
get a true idea of the financial standings of the company.
Tesla: Tesla is a company that manufactures, sells, designs and
develops high-performance fully electric vehicles. They also
manufacture, install and sell solar energy generation and energy
storage products. The revenue consists of automotive sales with
and without resale value guarantee, automotive leasing and the
leasing or sale of energy generation and storage. At the time of
revenue recognition, they reduce the transaction price and
record a sales return reserve against revenue for estimated
variable consideration related to future product returns.
Customers can exercise a buyback option in which the company
can resell the returned vehicle. This creates a deferred revenue
and is listed as a liability. The balance sheet shows a deferred
revenue for $1,258 on September 30, 2020 and $1,163 for
December 2019. Its total sales revenue which includes the

9. automotive sales, leasing and energy generation and storage
totaled $8,771 for 2020 and $6,303 for 2019. Listing the
deferred revenue allows the consumer to know what the
company assumes the likelihood of the buyback options. The
company makes these estimates by assessing the market value
and historical experience. Tesla has adopted ASC 606 since
2018. The FASB code for 606 is Revenue from Contracts with
Customers. The entity recognizes revenue to depict the transfer
of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services (FASB 606-05-
3).
Conclusion
Each of these companies have followed the rules of FASB
codification and GAAP regulations regarding recognizing
revenue on the financial statements. The new policies put i n
place regarding revenue recognition help investors and the
public better understand the true financial health of these
companies, and has been beneficial to everyone involved.

10. References
Mayes, T. R. (2020). Financial analysis with Microsoft excel.
Cengage Learning.
Warren, C. S., Jonick, C., & Schneider, J. (2020). Accounting.
Cengage Learning.
Tysiac, K. (2018). 6 key areas of change for accountants and
auditors. Journal of Accountancy, 225(3), 57-63.
Amazon 10-K retrieved from:
https://www.sec.gov/Archives/edgar/data/1018724/00010187241
7000011/R9.htm
Tesla 10-
K,https://ir.tesla.com/node/20456/html#Notes_to_Consolidated_
Financial_Statemen
Tesla 10-
Q,https://ir.tesla.com/node/20456/html#Notes_to_Consolidated_
Financial_Statemen
FASB Codification,https://asc.fasb.org/section&trid=49130394