Velocity Cellular Essay

433 Words2 Pages
When we determine the method for recognizing revenue for the Power Starterpack, we should consider which deliverable and unit of accounting. In order to identify this issue, I will discuss it from three different situations. 1. The activation card is not a separate deliverable and not a separate unit of accounting. First, according to the ASC 605-25-25-6, “a delivered item or items that do not qualify as a separate unit of accounting within the arrangement shall be determined for those combined deliverables as a single unit of accounting.” If the Power starterpack is not a separate deliverable, it shall be considered as a single unit of accounting, which is not a separate unit of accounting. Power starterpack is sold as a bundle, and only one stream of revenue. That means the activation card has to be sold as combination with service, and only recognize $200 as revenue. 2. The activation card is a separate deliverable and a separate unit of accounting. This situation is very similar to the situation in ASC 605-25-55-8. Because “The Power Starterpack is a prepaid voucher that gives subscribers an airtime window of 360 days to use $50 worth of minutes”, the activation card is a separate deliverable and a separate unit of accounting, the customer buying two separate deliverables, which are activation card and airtime service, and two ways of accounting, add service and revenue recognize when used. Based on ASC 605-25-55-8, “prepaid voucher has value on a standalone basis because it is sold separately and also met because there are no general rights of return in this arrangement. Therefore, the phone and the phone service should be accounted for as separate units of accounting”. Based on the 605-25-55-12, we can use similar way to Velocity Cellular allocate revenue to activation card, $140 and airtime service, as $60. 3. The activation

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