Comment by lelanthran
7 months ago
> Accounting rules.
Correct.
> If the credits last indefinitely, any unused credits cannot be counted as revenue.
Maybe incorrect? Unless they are cooking the books, the unused credits should reflect as a liability on the books.
When someone pays you for a thing, until they take delivery of it (or use it up if it is a service), you owe them the value of that thing.
If the contract states the credits expire EOY all bets are off. Implicitly makes the credits the 'delivery' not the service itself.
> If the contract states the credits expire EOY all bets are off. Implicitly makes the credits the 'delivery' not the service itself.
I wasn't addressing what the contract states and what the effect is; I was addressing the accounting rule for service sold but not yet delivered.
As long as the credits are usable (i.e. not expired), those credits are a liability on the books and financial statements must reflect that. This is why they need to expire the credits after a certain time.
The argument hing made is that the credits are what is being delivered.
It may or may not be correct, but it is not obvious to me that the revenue should be recognised when the credits are used or expire rather than when they are sold.
its probably defined somewhere in the rules (I assume US GAAP in this case?)
1 reply →