Need help to research a technical accounting issue for your client concerning Expense Recognition. In order to get a definitive answer to this issue, you will once again access the FASB Codification Research System to provide authoritative support which backs your recommendation to your client. You are required to develop two alternative accounting treatments and each alternative must include authoritative support from the Codification. Once you have outlined your two alternatives, select which alternative you most strongly support and will recommend to your client. You will find attached (3) documents you need to complete this assignment: 1) The Case - "Busy Signals". This explains the accounting issue that you are being asked to research. 2) Case Instructions and Solutions Format - The format of your finished project should be written in a memo-style, maximum 3 pages single spaced. Additional resources are listed here for your convenience in locating appropriate authoritative literature as you are not limited to using only the Codification; however their is one preferred solution and it is referenced within the Code. 3) Sample Case Solutions - this document gives you a more definitive example of how to structure your case solution.

Busy Signals, Unlimited Busy Signals, Unlimited (Busy), an SEC registrant, provides customer support services to third parties through the use of telephone service representatives (TSRs) who are employees of Busy. For example, a contract may involve Busy's 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 Busy 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 Busy's TSRs. For example, a contract may call for 100 \"seats,\" which 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 example, if TSRs spend an aggregate of 800 hours on calls for the week, the customer is billed for 800 hours, multiplied by the stated rate in the contract for the inbound and outbound call services provided. Revenue Recognition Policy Busy's current policy is to recognize revenue related to the call revenue as earned, i.e., when TSRs perform services. Busy's policy with respect to training revenue is to defer amounts received under these contracts in accordance with ASU Update No. 2009-13, Revenue Recognition with Multiple Element Arrangements, (October 7, 2009), and recognize these revenues over the life of the contracts. Busy does not believe that trainings is a separate deliverable under the contracts because the training of Busy's TSRs is integral to the services that Busy provides pursuant to these contracts. In addition, even if Busy were able to conclude that training was a separate deliverable, Busy does not believe that revenue from training could be accounted for separately as it would not meet the separation criteria specified in paragraph 25-5 of ASU Update No. 2009-13. Accordingly, based on the guidance contained in ASU Update No. 2009-13, 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 ASU Update No. 2009-13 in fiscal year 2010, Busy also adopted a new policy of deferring direct costs of employees for the specific costs associated with the specific hours related to the TSR training. Previously, Busy expensed these costs in the period incurred. (It is noted that the adoption of ASU Update No. 2009-13 did not change Busy's 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 Topic 13, Revenue Recognition). These direct costs include salary, benefits and payroll taxes. The adoption was made in conjunction with Busy's adoption of the provisions of ASU Update 2009-13. 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. Required: Is it appropriate for Busy to defer the costs of training its TSRs? Date: April 30, 2014 To: Busy Signals, Unlimited From: [ list each group member's name] Subject: Treatment of Training Costs _____________________________________________________________________________ _ Accounting Issue Busy Signals, Unlimited, provides customer support through telephone service representatives (TSRs) that generate two types of revenue: training and call. The call revenue is reported as earned and the training revenue is reported as deferred amounts. The accounting issue for Busy Signals, Unlimited is whether or not to defer the costs of training its TSRs. Alternatives Busy Signals, Unlimited, should either defer the cost of training or report the costs as an expense in the period they are incurred. Alternative #1 - Busy should not defer the costs of training its TSRs because .... [explain, according to authoritative literature, why Busy should expense in period incurred] Literature in support of Alternative #1 comes from ... [copy and paste from the authoritative literature the support for this treatment.] Drop in your conclusion for this alternative... \"Because of this authoritative support from ..... , it is believed that...\" Alternative #2Busy should defer the costs of training its TSRs because ... [explain according to authoritative guidance why Busy should defer these costs] Authoritative support for Alternative #2 can be found by reviewing ....[drop in the authoritative support from the Codification.] Solution - From reviewing the two alternatives presented above, Alternative #??? was determined to be the preferred solution. We recommend that Busy Signals, Unlimited ...[summarize, briefly, your conclusion for the client.] Case Instructions and Solutions Format General Instructions: You will work on the case in groups of three to four (five group members is allowed, but not preferred). You may select your groups. If someone in your group has not done a fair amount of work please notify me via email. I will meet with you to discuss the issue and we can come up with a course of action together. Please limit your solutions to approximately two pages single spaced. Be sure to use the following format for your solutions. Format: Accounting Issue Alternatives You must have two alternatives. You may or may not agree with one of them. Literature in Support of Alternative 1 Include in this section references to the actual literature. You should copy and paste paragraphs if appropriate. Additionally, include discussion as to why this literature is appropriate and how proponents of this alternative feel this literature supports the alternative. Literature in Support of Alternative 2 Include in this section references to the actual literature. You should copy and paste paragraphs if appropriate. Additionally, include discussion as to why this literature is appropriate and how proponents of this alternative feel this literature supports the alternative. Solution Instructions on researching support: To access the FASB Codification website, use the following: Website: Username: Password http://aaahq.org/ascLogin.cfm AAA51714 yuEseLZ Additionally: The FASB's codification website has taken down some of the literature it previously included in its search. As such, you will need to use several other recourses to help you with your case. You will not necessarily reference all of these recourses in your solutions, but all of them could help you in solving the case. In addition to this literature you will need to use the codification site to find some additional support. Concepts Statements: http://www.fasb.org/st/#cons OR Go to: 1. http://www.fasb.org 2. Click the link to Pronouncements on the left of your screen 3. Scroll down to \"Statements of Financial Accounting Concepts\" 4. Click the link for \"[1-7]\" 5. Then click on the appropriate Concepts Statement as amended SAB 104: http://www.sec.gov/interps/account.shtml Scroll down to SAB 104. OR Go to: 1. www.sec.gov 2. Clink the link to Staff Accounting Bulletins 3. Scroll down and click the link to SAB 104 (opens a pdf file) SAB Topic 13: http://www.sec.gov/interps/account/sabcode.htm Scroll down to Topic 13. OR 1. Go to www.sec.gov 2. Click on the link to Staff Accounting Bulletins 3. Click on the link to Codification of Staff Accounting Bulletins 4. Scroll down and click on the link to Topic 13