To determine the amount of rebate to recognize upon each product sale, Company A would take the full estimated rebate ($2,500) and divide it by the sales price of the 1,000 units (Company A’s expected sales). As each of the units are shipped, Company A would recognize a rebate accrual of 2.5% ($2,500 total rebate/$100,000 anticipated sales). Company A would record sales to Distributor X at a transaction price of $97.50 ($100 less 2.5% discount). At the end of each quarter, Company A would revise the estimate of sales and true up the calculation and rebate that will be due at the end of the arrangement.

3 Accounting for the annual pharmaceutical manufacturers fee

Company A determined that it would be appropriate to use a cost-to-cost method to measure progress because this measure of progress best depicts its transfer of control of the R&D services to Company B under the contract. As such, Company A transferred control of the license to Company B at that time. There are no other performance obligations in the contract and Company A has concluded (1) collection of the consideration is probable and (2) there is a substantive termination penalty in the event the customer cancels the contract. Company A, a biotechnology company, enters into a license arrangement with Company B, a pharmaceutical company, to jointly develop a potential drug that is currently in Phase II clinical trials. As part of the arrangement, Company A agrees to provide Company B a perpetual license to Company A’s proprietary intellectual property.

2 Receipts for out-licensing of IP

Company A would also need to determine if the delivered product and specified upgrades are separate performance obligations. Company A enters into a two-year arrangement with Company B for the sale of pharmaceutical drugs on January 1, 20X8. Company A routinely offers other similarly-sized customers a 5% discount. Company A should also evaluate if the R&D services are optional; that is, could the customer decide to cancel at any time with no penalty or hire another vendor or biotech to perform the services.

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In this territory, it is common that end users have payment terms between 90 and 180 days. In this example, the indicators appear to support a conclusion that Wholesaler X is the principal in the sale of accounting for pharmacies the drugs to Hospital Y. Therefore, Wholesaler X is Company A’s customer for the order of 100,000 tablets. There are also indicators present that could point to Wholesaler X being Company A’s agent.

• That’s why our accounting software now includes double-entry accounting – an industry standard feature that helps you keep all of your debits and credits in check.
• Baltic Hub, a global shipping terminal in Poland, said in a statement it had been battling issues related to the outage.
• The fees paid are at market rates and payments received are non-refundable.
• Pharma’s inventory does not sit in the channel at the end of a particular quarter (i.e., product sold in Q2 will be sold through to the end customer in Q2).
• The remaining transaction price will be allocated to the manufacturing and recognized when (or as) control of the product is transferred to the customer.
• In estimating variable consideration related to the regulatory milestone, at inception Company A concluded that the most likely amount was zero.
• Cloud accounting software can alleviate the headache of managing large quantities of stock, tracking expenses and even analysing demand.

My passion for entrepreneurship drives me to share my expertise with aspiring entrepreneurs, empowering them to turn their business dreams into reality. Cybersecurity programs like CrowdStrike’s frequently and automatically update themselves to account for new tactics that malicious hackers have discovered. And there’s always a slight risk that any software update will be incompatible with other programs. Airports and flights across the world were severely delayed or canceled altogether, as the computers on which these services rely were disrupted by the issue. Three of the largest airlines in the United States — American Airlines, Delta Air Lines and United Airlines — all issued ground stops, citing communications problems.

• The license is delivered to Company B in the first quarter and the R&D services will be provided over time.
• Governments, in turn, typically cut public spending to generate sufficient revenues to meet their new obligations.
• Wholesaler X has the ability to sell the drug tablet to any customer at any price and can decide whether to sell the drug to Hospital Y or another entity (e.g., another hospital or pharmacy).
• In addition to these aspects of GAAP that health care accountants follow, there are numerous healthcare-specific concepts that apply as well.
• Every month, your dedicated bookkeeper categorizes your pharmacy’s transactions and creates financial reports.
• We take a proactive approach to manage your books and handle your taxes, freeing you up to focus more on providing quality healthcare services.

And, most won’t lend to pharmacies as a result of this lack of understanding, among other reasons. As well, it’s best to heed the expert advice of lawyers who specialize in pharmacy law to avoid issues from inexperienced lawyers. Depending on the type of pharmacy you operate, there are averages for payroll that you need to be aware of—and strive to obtain. “Payroll is one of your largest expenses and it has a material effect on cash flow, so you should first focus on managing your payroll costs,” Sykes said. Is there growth in the industry as a whole and, if so, how does your pharmacy compare?

• For example, companies need to assess if the storage of stockpile product, the maintenance and rotation of stockpile product, and the shipping of product are separate performance obligations.
• If the challenge of marrying data analytics with supply chain, innovation and regulatory compliance resonates with your professional goals, a career in pharmaceutical accounting may be a good fit.
• As of December 31, 20X8, Company A is able to identify and segregate the product for the customer in its warehouse and it is ready for transfer to the customer.
• Company A should therefore use one of the suitable methods to determine standalone selling prices of the medical device and the option.
• The functionality of the intellectual property to which the customer has rights is expected to substantively change during the license period as a result of activities of the entity that do not transfer a promised good or service to the customer…

Mountain of obligations

28 Bill-and-hold arrangements