Given a promotional service provided by a retailer involving a membership discount program, how should the up-front non-refundable fee be accounted for? differed income based on amortized schedule? or direct earnings due to the lack of a refund clause in the contractual agreement?
any help on this question, or guidance on where to look for the answer (i.e FASB statements, ARBs or other research areas) would be greatly appreciated.
Does anyone know anything about this,
Thanks
"CPA2BE" wrote
It depends on lots of variables I suppose. Not enough is known about the program to know what the impact on the financials is. What does "membership" get the member? What expenses can be anticipated for the retailer, if any? Is this a one-time membership or is it annual? Does everyone renew membership at the same time each year, or are memberships renewed relatively evenly over time?
What are you amortizing, and over what time frame and why that time frame? What expense are you trying to match the revenues to?
Certainly if there were refund provisions then booking a liabilty and shifting some portion to revenues each month is appropriate, but that's not the case here.
If there are no services to be rendered to the members, there's not base reason to accrue the revenues over time (there's no matching expense).
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