Co. B an SEC registrant provides customer support service to 3^rd parties through the use of a telephone service rep who are employees of Co. B. For example, a contract may involve Co. B TSRs providing technical support for products of Company X. Since the products of Company X are unique to Company X, TSRs typically have to be trained to provide technical support. As a result, for each contract, there are generally two sources of revenue to Co. B if TSR training is a required part of the contract.

Training Revenue

Training revenue consists of a nonrefundable, up-front fee (based on training hours) billed to customers to cover the cost of training Co. B TSRs. For example, a contract may call for 100 seats, with each seat to be trained for 100 hours over a period of three to four weeks

Call Revenue

Call revenue is based on a stated rate per hour. For Ex: if TSRs spend an aggregate of 800 hours on calls for the week, the customer is billed for 8hours, multiplied by the stated rate in the contract for the inbound or outbound call services provided.

Revenue Recognition policy

Co. B current policy is to recognize revenue related to the call revenue as earned, Ex: when TSRs perform services. Co. B policy with respect to training revenue is to defer amounts received under these contracts in accordance with Emerging issues Task Force Issue No. 000-21.

Revenue Arrangements with Multiple Deliverables (EITF 00-21) and Staff Accounting Bulletin No. 104 -- Revenue Recognition (Office of the Chief Accountant, December 17, 2003) (SAB 104), and recognize these revenues over the life of the contracts. Busy does not believe that training is a separate deliverable under the contracts because the training of Co. B TSRs is integral to the services that CO. B provides pursuant to these contracts. In addition, even if Co. B were able to conclude that training was a separate deliverable, Co. B does not believe that revenue from training could be accounted for separately as I would not meet the separation criteria specified in paragraph 9 of EITF 00-21. Accordingly, based on the guidance contained in EITF 00-21 and SAB 104, Busy has concluded that deferral of training revenue and recognition over the life of the contract is the appropriate accounting treatment.

Cost Deferral Policy

Upon the adoption of EITF 00-21, in fiscal year 2003, Co. B also adopted a policy of deferring direct costs of employees for the specific costs associated with the specific hours related to the TSR training. (It is noted that the adoption of EITF 00-21 did not change Co. B revenue recognition policies with respect to training, as the revenue from training was previously deferred and recognized over the life of the contract pursuant to the guidance contained in SAB 101, Revenue Recognition). These direct costs include salary, benefits and payroll taxes. The adoption was made in conjunction with Co. B adoption of the provisions of EITF 00-21 in Co. B fiscal year 2003. The fee charged to train employees exceeds the direct costs to train employees on a contract and aggregate basis, i.e., the total training revenues exceed total training costs on an individual contract basis, as well as on a total, companywide basis. Additionally, the total fees (training revenue and call revenue) on an individual contract and aggregate basis exceed the direct costs of a contract, including amortization of the deferred costs, before any indirect, or SG&A, costs.

IS IT APPROPRIATE FOR CO. B TO DEFER THE COSTS OF TRAINING ITS TSRs???

PLEASE EXPLAIN!!!!!