As CFO of New Era Financing, you have requested staff to evaluate the appropriate method of recognizing revenue from finance charges. In applying data analytics utilizing character recognition software to read hundreds of loans, you determined that a significant amount of finance charges is associated with discount loans. From the data, you would like to establish a policy of recognizing 10 to 15 percent of the finance charges on the discount loans as revenue in the first month of the loan and recognize the balance of such charges as yield adjustments as the receivables are liquidated.

Required: 

Conduct appropriate research and write a brief report as to whether the CFO’s suggested policy is an acceptable method of recognizing revenue from finance charges. Provide specific Codification references.