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Question: XYZ Corporation, a multinational conglomerate, is preparing its financial statements for the fiscal year ending December 31, 20X3. The company engages in various business

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XYZ Corporation, a multinational conglomerate, is preparing its financial statements for the fiscal year ending December 31, 20X3. The company engages in various business activities across different sectors, including manufacturing, retail, and technology services. As the senior accountant of XYZ Corporation, you are tasked with addressing several complex accounting issues. Please provide detailed explanations for each subpart of the question below.

(a) Revenue Recognition and Multiple Revenue Streams:

XYZ Corporation operates in diverse markets, generating revenue through various streams such as product sales, service contracts, licensing agreements, and subscription services. Analyze the revenue recognition policies applicable to each revenue stream. Consider the specific criteria outlined in the International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP) in the United States. Discuss how the company should recognize revenue for each of the following scenarios:

(i) Product Sales: XYZ Corporation sells electronic devices globally. Explain the revenue recognition principles for product sales, including when revenue should be recognized, and any considerations for sales returns and warranties.

(ii) Service Contracts: The company offers maintenance and support services for its products, with service contracts typically spanning multiple years. Describe the accounting treatment for revenue recognition related to long-term service contracts, considering the installment method and percentage-of-completion method.

(iii) Licensing Agreements: XYZ Corporation licenses its proprietary software to third-party companies. Elaborate on the revenue recognition criteria for licensing agreements, including upfront fees, royalties, and milestone payments.

(iv) Subscription Services: The company provides subscription-based services, such as cloud computing and software-as-a-service (SaaS). Discuss the appropriate revenue recognition methods for subscription services, addressing issues related to billing cycles, contract modifications, and customer cancellations.

Ensure to compare and contrast the revenue recognition principles under IFRS and GAAP for each revenue stream and provide recommendations for XYZ Corporation to adhere to the relevant accounting standards while reporting its financial performance accurately and transparently.

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