Comments on: How and when do companies recognize revenues? http://stockmarketbeat.com/blog1/2006/04/20/how-and-when-do-companies-recognize-revenues/ Our beat: The stock market. Our job: Beat it. Tue, 06 Jan 2009 08:08:26 +0000 http://wordpress.org/?v=2.2.1 By: Trent http://stockmarketbeat.com/blog1/2006/04/20/how-and-when-do-companies-recognize-revenues/#comment-29429 Trent Thu, 10 May 2007 20:33:50 +0000 http://stockmarketbeat.com/blog1/2006/04/20/how-and-when-do-companies-recognize-revenues/#comment-29429 I'm guessing this is related to Apple's iPhone and their decision to pro-rate the revenue over the life of the contract rather than recognize it up front. Normally the phone portion would be treated as a sale and revenue recognized when the customer takes the phone. In this case, Apple is treating it as a lease, in which the customer is paying for the phone over the term of the service contract. It is possible - depending on their contract with AT&T, that this is the case. For example, Apple may have an agreement to accept returns or have some other contingent liability that suggests it shouldn't be recognized as a sale. I’m guessing this is related to Apple’s iPhone and their decision to pro-rate the revenue over the life of the contract rather than recognize it up front.

Normally the phone portion would be treated as a sale and revenue recognized when the customer takes the phone. In this case, Apple is treating it as a lease, in which the customer is paying for the phone over the term of the service contract.

It is possible - depending on their contract with AT&T, that this is the case. For example, Apple may have an agreement to accept returns or have some other contingent liability that suggests it shouldn’t be recognized as a sale.

]]> By: Manju mayachar http://stockmarketbeat.com/blog1/2006/04/20/how-and-when-do-companies-recognize-revenues/#comment-29427 Manju mayachar Thu, 10 May 2007 20:28:59 +0000 http://stockmarketbeat.com/blog1/2006/04/20/how-and-when-do-companies-recognize-revenues/#comment-29427 when do cell phone companies recognize revenues? At the sale of a cell phone? or at end of a contract period? for example: if ABC Cell phone company makes and sell phone and provides service .Customers generally sign two separate contracts, one governing the sale of the devices and the other governing the provision of the service. Once the phone is sold to a customer the same cell phone provides contracts for 12 months and billed on a monthly basis. The services are priced at standard rates, although discounts are offered depending on the number of devices sold. The devices also have been sold at a discount. However, the discount is based on the number of units purchased (or to be purchased) and does not appear to be unreasonable. The ABC Cell phone devices are made to be used exclusively with the ABC company services and, currently, there are no other competitors making devices that work with the ABC services. Customers may cancel the service at any time. However, amounts paid related to the devices are non-refundable. Payments for the devices are due upon completion of the installation and final acceptance by the customer. How should revenue be recognized for sales of both the Phone and service? thanks, when do cell phone companies recognize revenues? At the sale of a cell phone? or at end of a contract period? for example: if ABC Cell phone company makes and sell phone and provides service .Customers generally sign two separate contracts, one governing the sale of the devices and the other governing the provision of the service. Once the phone is sold to a customer the same cell phone provides contracts for 12 months and billed on a monthly basis. The services are priced at standard rates, although discounts are offered depending on the number of devices sold. The devices also have been sold at a discount. However, the discount is based on the number of units purchased (or to be purchased) and does not appear to be unreasonable.
The ABC Cell phone devices are made to be used exclusively with the ABC company services and, currently, there are no other competitors making devices that work with the ABC services. Customers may cancel the service at any time. However, amounts paid related to the devices are non-refundable. Payments for the devices are due upon completion of the installation and final acceptance by the customer.

How should revenue be recognized for sales of both the Phone and service?

thanks,

]]> By: Percentage of Completion Accounting - Financial Education - Everything You Need To Know About Finance http://stockmarketbeat.com/blog1/2006/04/20/how-and-when-do-companies-recognize-revenues/#comment-13154 Percentage of Completion Accounting - Financial Education - Everything You Need To Know About Finance Mon, 05 Feb 2007 18:59:04 +0000 http://stockmarketbeat.com/blog1/2006/04/20/how-and-when-do-companies-recognize-revenues/#comment-13154 [...] We previously noted that the majority of sales are reported under very strict guidelines. For a bookstore it is easy to tell when a customer has taken possession of the merchandise, thus qualifying the transaction as a sale. However, consider long-term projects such as large construction projects. Is it right to wait until the last brick is laid before recognizing the sale? Remember, according to the matching principle revenues and their associated expenses should be recognized in the same accounting period. The contractor has expenses throughout the course of the project. Should these expenses be held off the books until the project is completed as well? [...] […] We previously noted that the majority of sales are reported under very strict guidelines. For a bookstore it is easy to tell when a customer has taken possession of the merchandise, thus qualifying the transaction as a sale. However, consider long-term projects such as large construction projects. Is it right to wait until the last brick is laid before recognizing the sale? Remember, according to the matching principle revenues and their associated expenses should be recognized in the same accounting period. The contractor has expenses throughout the course of the project. Should these expenses be held off the books until the project is completed as well? […]

]]> By: Analyzing Sales - Financial Education - Everything You Need To Know About Finance http://stockmarketbeat.com/blog1/2006/04/20/how-and-when-do-companies-recognize-revenues/#comment-12940 Analyzing Sales - Financial Education - Everything You Need To Know About Finance Sat, 03 Feb 2007 22:00:34 +0000 http://stockmarketbeat.com/blog1/2006/04/20/how-and-when-do-companies-recognize-revenues/#comment-12940 [...] How and when are revenues recognized? [...] […] How and when are revenues recognized? […]

]]> By: 2007 February 02 - Financial Education - Everything You Need To Know About Finance http://stockmarketbeat.com/blog1/2006/04/20/how-and-when-do-companies-recognize-revenues/#comment-12770 2007 February 02 - Financial Education - Everything You Need To Know About Finance Fri, 02 Feb 2007 19:11:31 +0000 http://stockmarketbeat.com/blog1/2006/04/20/how-and-when-do-companies-recognize-revenues/#comment-12770 [...] How and when are revenues recognized? [...] […] How and when are revenues recognized? […]

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