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Reply to post Due to delayed payment or payment transfers, the health care industry has a specific billing method. This allows companies to set the
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Due to delayed payment or payment transfers, the health care industry has a specific billing method. This allows companies to set the time frame for the revenue to be recognized. According to the new standards on revenue recognition, companies must estimate when consumers will be able to pay their debts Deloitte Team, For example, companies should make an income assessment concerning the ability of their clients to pay for the service, depending on whether they pay themselves, whether they have insurance or if a government agency pays on their behalf. Standards prescribed by the FASB also require those bad debts, characteristic of this industry, must be recorded as operating expenses. According to the old standards, bad debts were treated as deductions from potential income Deloitte Team,
The travel, hospitality, and leisure industry are characterized by numerous promotional actions that significantly change the price of services, depending on whether consumers have signed a contract under special terms or one that guarantees regular prices Deloitte Team, Companies should develop methods to calculate and evaluate costs, including the impacts of discounts, rebates, performance bonuses, etc. In contracts resulting from promotional campaigns such as the Discount Loyalty Program, consumers can purchase a part of services for free or at significant discounts. According to FASB regulations, contracts for each service are signed separately for each obligation the company needs to pay under that loyalty program. The time of recognized revenue can be recorded in different ways. For example, in the travel industry, it can be recorded on the booking date or departure date, or last payment date Deloitte Team,
In the retail industry, there are different levels of complexity regarding revenue recognition depending on numerous promotional activities, such as guarantees, loyalty programs, and gift cards, which affect revenue Kishi All this can create variability in the prices of the goods sold. Companies must have an elaborate evaluation system where the socalled "expected value" or "most likely amount" is calculated. The use of gift cards is every day in today's retail industry. Cards are sold for cash, but consumers use them for future transactions. The companies, therefore, undertake to fulfill their part of the obligation in the future. In that case, they must recognize the liability contract for which the prepayment was taken. When that transaction happens in the future, the retailer derecognizes the liability and recognizes revenue when the customer spends his gift card Kishi
The common denominator for all these industries is that their relationship with customers has much more complex contracts than the traditional buysellcharge transactions in which revenue and value are recognized upon change of ownership. In modern times and the ultracompetitive market, there are many different types of transactions, the value and time of realization of which should be assessed by proper analysis
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