I came accross a situation which I am unfimilar with. Basically, the company I am working for installs large computer systems and servers. After the they install the new systems they generally remove the old units from their customer sites, however, rather than scrap the items they keep them as theirs, fix them up, and then rent them out to other customers. Basically, they receive free assets as their customers have no idea what happens to the old units once the new ones are replaced.

Per FAS 116, sorry no codification code, if a company receives contributed assets the assets should be recorded at FMV and revenue should be recognized. Basically, you debit the fixed asset account and credit revenue. Currently this is how the transaction is being recorded by the company, however I am not certain it is correct. My concern is that there was no contribution made by their customer saying we are giving you the old units, all that they know is that the new unit is installed and old ones are gone. As these units have been treated as contributions revenues may be significanly overstated.

If anyone has any advice or guidance I would appreciate it.