Revenue Recognition Essay Example | Topics and Well Written Essays - 1500 words

Revenue Recognition - Essay Example Although it may initially seem counterintuitive to adopt the practices for revenue recognition stated in EITF 00-21,it is clearly the next step in establishing the company as a leader not only in the aircraft transport field but as a pioneer in the adoption of enhanced accounting guidelines is concerned. One must understand that although accounting revenues and profit will decrease, the company’s financial position is not affected. Although the recognized revenue for the current year and the subsequent restatement of the previous financial statements will result in a decrease of our stated revenues and profit, under the astute eye of the investment community it will clearly be perceived as an act that further solidifies the company as a leader in the industry. Additionally a lot of our current year revenue losses will be offset by additional revenue being recognized from contracts obtained during the previous four years of operations. Under our current accounting methods the fractional interest contracts are immediately recognized as revenue in its totality for the current accounting period. The monthly management revenue stream and the hourly usage incomes are both recognized as well as related expenses as they are incurred. In the industry, a lot of different revenue recognition practices are utilized. For example just like our current accounting practices, some companies record revenue on initial sale of fractional interest at the time of sale. There are other companies that account the revenue from programs similar to operating leases whereas other companies spread the income over the term of the agreement. As a result, the following three options were being analyzed by management: A) Revenue attributable to the initial sale of the fractional interest should be recognized at the time of sale. The other attributes of the program, namely the