The company selling X and Y have a contract with their customer that
The customer was shipped Y at the beginning of the contract even though the purchase price wasn't yet known, and then they were shipped units of X periodically throughout the period of the contract. At the expiration of the contract, the final price of Y is calculated an an invoice mailed to the customer.
The question is, when can the selling company recognize the sale price of Y in their COGS. Do they get the COGS deduction:
1) When they ship Y (they use FOB shipping so title passes when it is shipped) 2) When the contract concludes and the final price of Y can be determined 3) When the invoice is put in the mail, or recv'd by the customer. 4) Some other moment in time ?
The price of Y can't be included in revenue until the final price is known, per SAB 104, and the matching principle would tend to suggest the COGS can't be deducted until the price of Y is recorded as revenue, so I'm leaning towards (2), but I can't find anywhere, if it exists at all, when GAAP says a sale actually occurs. Or are SAB considered part of GAAP?