Definitions of Terms
Collection method | A method that recognizes revenue when cash is collected. |
Completed performance method | A method that recognizes revenue after the last significant act has been completed. |
Direct costs | Costs that are related specifically to the performance of services under a contract or other arrangement. |
Indirect costs | Costs that are incurred as a result of service activities that are not directly allocable to specific contracts or customer arrangements. |
Initiation fee | A one‐time, up‐front charge that gives the purchaser the privilege of using a service or facilities. |
Installation fee | A one‐time, up‐front charge for making equipment operational so that it functions as intended. |
Out‐of‐pocket costs | Costs incurred incidental to the performance of services that are often reimbursable to the service firm by the customer either at actual cost or at an agreed‐upon rate (e.g., meals, lodging, airfare, taxi fares, etc.). |
Precontract or preengagement costs | Costs incurred prior to execution of a service contract or engagement letter. |
Product transaction | A transaction between a seller and a purchaser in which the seller supplies tangible merchandise to the purchaser. |
Proportional performance method | A method that recognizes revenue on the basis of the number of acts performed in relation to the total number of acts to be performed. |
Service transaction | A transaction between a seller and a purchaser in which the seller performs work, or agrees to maintain a readiness to perform work, for the ... |
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