Blue Gilia Construction, Inc.: A Revenue Recognition Case Study

Abstract

This case emulates a real business situation in the construction industry providing students the opportunity to critically think about revenue recognition for long-term contracts. The case includes an error in the financial reports and weaknesses in accounting procedures giving students the opportunity to review the COSO framework, evaluate internal controls procedures and make recommendations regarding accounting processes. Accounting concepts for revenue recognition using percentage-of-completion for long-term contracts can be challenging for students to grasp and remember. This case study takes the approach that students need to think critically about the implications of revenue recognition and be able to analyze the effects of a change (correction) to the financial reports. By providing students with a completed Excel spreadsheet for a percentage-of-completion schedule, students are able to quickly make a change (correction) to the Excel spreadsheet and analyze the effects of the change on the revenue recognized during the period as well as the effect on the assets and liabilities.