Читать книгу Revenue Recognition - Renee Rampulla - Страница 48

First year of the contract

 Sutra Inc. provides quarterly reports of usage and pays within the agreed-upon period.

Second year of the contract

 Sutra Inc. continues to use Longo Technologies’ patent, but its financial condition declines.

 Sutra Inc.’s current access to credit and available cash on hand are limited.

 Longo Technologies continues to recognize revenue on the basis of Sutra Inc.’s usage throughout the second year.

 Sutra Inc. pays the first quarter’s royalties but makes nominal payments for the usage of the patent in quarters 2, 3, and 4.

 Longo Technologies accounts for any impairment of the existing receivable and any credit losses on existing contract balances in accordance with other appropriate FASB ASC topics.

Third year of the contract

 Sutra Inc. continues to use Longo Technologies’ patent.

 Longo Technologies learns that Sutra Inc. has lost access to credit and its major customers and thus the customer’s ability to pay significantly deteriorates.

 Longo Technologies concludes that it is unlikely that Sutra Inc. will be able to make any further royalty payments for ongoing usage of the patent.

 As a result of the significant change in facts and circumstances, Longo Technologies reassesses whether collectability is probable and determines that the criteria has not been met because it is no longer probable that they will collect the consideration to which they will be entitled.

 Longo Technologies ceases to recognize any further revenue associated with Sutra Inc.’s future usage of its patent.

 Longo Technologies accounts for any impairment and additional credit loss on the existing receivable in accordance with other appropriate FASB ASC topics.