Revenue Recognition and Up-Front non-refundable Membership fees


C

CPA2BE

Given a promotional service provided by a retailer involving a
membership discount program, how should the up-front non-refundable
fee be accounted for? differed income based on amortized schedule? or
direct earnings due to the lack of a refund clause in the contractual
agreement?

any help on this question, or guidance on where to look for the answer
(i.e FASB statements, ARBs or other research areas) would be greatly
appreciated.
 
Ad

Advertisements

A

Arnold

CPA 2 Be,

If the membership fee is a one-time payment, it is income upon receipt. If
it is an annual fee that will be renewed each year, it should be booked as a
liability such as "Unearned Membership Fees" and 1/12th of each member's
annual fee should be recognized each month. Don't fall into the trap of
simply taking 1/12th of the balance each month because it is a mathematical
error. You have to take 1/12th of the original annual fee for this to work.

Does this make sense?

Arnold
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top