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Revenue Recognition by Frank J. Beil

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Measurement and Allocation Guidance

Our measurement challenge for the consideration received is complicated by two factors.

1. accounting for contingent (variable) fees in an arrangement;

2. allocating discounts to the deliverables in the arrangement.

The process of allocating contingent fees for a revenue arrangement involves arriving at a conclusion as to whether or not the consideration to be received is fixed or determinable. When performing this analysis, companies are guided by three “rules” as established by accounting standard setters.

1. Customers will only purchase the contractual minimum amount of products and services in the arrangement.

2. Performance bonuses should not be included in allocable consideration to be received until ...

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