Revenue Recognition for Termination of Convenience Clause


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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.
 
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Steve-LevelUp

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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.
 

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