Andrew Szeto
Yiyi Zhu
Minrao Zheng
Revenue Recognition Case
1A. The appropriate method to recognize revenue for the Power Starterpack is to consider
the activation card as a separate deliverable and a separate unit of accounting.
According to ASC 605-25-25-5, in an arrangement with multiple deliverables, the
delivered item or items shall be considered a separate unit of accounting if both of the
following criteria are met:
a. The delivered item or items have value to the customer on a standalone basis.
The item or items have value on a standalone basis if they are sold separately by any
vendor or the customer could resell the delivered item(s) on a standalone basis.
b. If the arrangement includes a general right of return relative to the delivered
item, delivery or performance of the undelivered item or items is considered probable and
substantially in the control of the vendor.
According to the memo, it says, “each subscriber is required to have an activation
