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Revenue Recognition by Frank J. Beil

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Performance Models

The Completed Performance model is generally used when we deliver products to customers. The analogy of revenue recognition on delivery can be made to services, when the service consists of performing a single act. For example, you visit a financial planner who charges by the hour. Each hour of the planner’s time with you is revenue to the planner. Note that, whether they would use the Proportional Performance model, say billing increments of 15 minutes, or the Completed Performance model, 1 hour, you arrive at the same amount of revenue.

To extend the example, let’s say you are the customer; and you contract with the financial planner for delivery in 3 months’ time a comprehensive financial plan. Payment is due on delivery ...

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