Revenue Recognition For Service

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May 10, 2015 at 6:57 pm #245152
yellow
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Hello Mike,
How are you!? Hope you are fine 😀
My question is about revenue recognition for SERVICE. As far as I know we should :
1- recognise revenue in accordance to the stage of completion of the service (which I think is straight line) and if it can not be estimated reliably then we should adopt ” no gain/no loss” approach.
Now suppose we are rendering a service! Total revenue is $5M and service period is 3 years.
So my question is how we should recognise the revenue? $5M / 3yrs = $1.67M per year
Hope the above answer is not right, otherwise would you kindly please tell why the answer of ”June 2013, Question 2, Part B” is not the same!
Kind Regards
Thank you in advance
May 10, 2015 at 9:02 pm #245172
MikeLittle
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From memory the question has two elements of revenue. The first part is earned immediately (a non-refundable payment in respect of some hardware?)
The second element is a three service support. Am I correct so far?
If so, we should recognise the non-refundable element straight away and spread the service support element over the service period
Does that do it for you?
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