problem 7-89

Accounting Decisions and Judgments A Transition Resource Group for Revenue Recognition (TRG) was established by the PASB to AD&J 7-0 uestions from companies transitioning to ASC 606. The topic of TRG Memo No. 59 is the account Rosearching a for Case comment on 1 to customers in the revenue recognition process. The following is a summary of an example for payment an example Accounting Treatment Anatyrning the prescnted by the TROis vider makes a $1 million payment to a customer as part of the negotiations in a contract to provide senvisourcing services. The payment to the customer was negotiated because the custoner will incur costs or Upiront Customer Payments Lo4 I sinate employees and dispose of equipment that is currently utilized in the operations to be outsour stimates that the customer will pay a fee of $6 million for five years of services. The contract is can The elt at the end of any month for no penalty, although Service Provider expects the customer to entity years because the customer has limited ability to perform the services internally o he ustomer terminated employees and disposed of equipment. Additionally, the customer has incurred given thnt setup costs and will incur the significant setup costs t signims from past experience with entering into similar contracts with other customers that most cust nowancel contracts. Service Provider has no previous revenue from contracts with this customer e vendors. Finally, Service Provider do not Requcate TRG Memo No. 59 from the FASB website (fasb.org) and indicate (1) the date of the memo, (2) the main question addressed by the TRG, and (3) the Codification standard that is referenced for the question. he TRG Memo No. 59 references ASC 606-10-32-27 in the discussion regarding the timing of recogni- tion of consideration payable as a reduction of revenue when consideration payable was accounted for as a reduction of a transaction price. Why is this Codification reference relevant? Briefly summarize how two different views evolved from this particular Codification reference. In the example provided above, how would the consideration payable be recognized under the two different views described in part b? What view do you support in reference to this example? Explain