Читать книгу Revenue Recognition - Renee Rampulla - Страница 37

 Service provider ABC entity enters into a three-year service contract with new customer XYZ at the beginning of a calendar month.

 XYZ has a very low credit quality.

 The transaction price of the contract is $720, and $20 is due at the end of each month.

 The standalone selling price of the monthly service is $20.

 Both parties are subject to termination penalties if the contract is cancelled.

 The ABC entity’s history with this class of customer indicates that while they cannot conclude it is probable that XYZ will pay the transaction price of $720, XYZ is expected to make the payments required under the contract for at least nine months. If, during the contract term, XYZ stops making the required payments, ABC entity’s customary business practice is to limit their credit risk by not transferring further services to XYZ and to pursue collection for the unpaid services.

Given the facts above, ABC entity needs to assess whether it is probable that they will collect substantially all of the consideration they will be entitled to in exchange for the services they transferred to XYZ. This would include their assessing their history with this class of customer as well as their business practice of stopping service in response to a customer’s nonpayment.