Accruing Transportation Expenses

[Minerva]

Hypothetical company sells widgets at $1 a piece, fiscal year matches calendar year.

Company sells 1000 widgets to customer under shipping terms FOB shipper, but the company still agrees to pay the costs for shipping (let's say $500 for this shipment). The shipment leaves the company on December 31st, 2012. The company recognizes $1000 in sales revenue in 2012 as the goods are now in title to the customer.

However, the shipment does not arrive to the customer until January 3rd, 2013. Can the company accrue for the $500 in transportation expense in 2012 even though the shipment did not deliver until 2013?

 

[kirby]

I think a case like this is best dealt with by creating a policy and sticking to it. For example: " the policy is to accrue shipping costs upon shipment ( or upon delivery ) (or upon receipt of the shipping invoice) ". Then you choose one of those methods and stick to it.