Refunds and Rights of Return
Service providers generally allow their customers to cancel, partially or in full, if the service does not meet contractual expectations. Similar to product sales, revenue recognition may have to be deferred for the company until customer acceptance is received or the refund or return rights period has lapsed.
Customer rights of return generally are categorized as a subjective refund right (satisfaction guaranteed), customer acceptance provisions on the seller meeting their specified performance criteria, and seller meeting the buyer’s specified criteria. The timing of the recording of revenue depends on the type of refund or return that is offered to the customer in the revenue arrangement.
The promise by the seller ...