Revenue Recognition for Termination of Convenience Clause

Discussion in 'General Accountancy Discussion' started by jiji2006, Aug 10, 2017.

  1. jiji2006

    jiji2006

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    Hi, If a contract has a termination of convenience clause and the contract is to build a product for the customer, when should the revenue be recognized? I think that it should be all deferred until the product is implemented at the customer's system because the customer can technically terminate and everything is refunded to the customer.
     
    jiji2006, Aug 10, 2017
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  2. jiji2006

    Steve-LevelUp VIP Member

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    I would agree with your assumption. If the cancellation clause includes the full refund/non commitment clause, then you shouldn't recognize revenue until the product is delivered to the customer.
     
    Steve-LevelUp, Aug 10, 2017
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