REIKE TECHNOLOGY: REVENUE RECOGNITION AND PAY-WHENPAID CLAUSES

1. What is a pay-when-paid clause? Are there any legal problems with a contract containing such a clause?

2. Why did Shenghui change the contract settlement and add the pay-when-paid clause? When Reike accept the pay-when-paid contract?

3. When can revenue not be recognized when Reike reaches each milestone of the Zhongjiao project?

4. How should Reike recognize project revenue and costs at the end of the second year? Which opinion about revenue recognition do you support? Why?

5. Assume you are in charge of the Zhongjiao project at Reike and are required to draft a proposal to the general manager on how to face the competition in the software outsourcing industry and manage risks. What issues will you consider, and what proposals will you put forward?