Question:
Identify the potential revenue recognition issues related to the each of the company’s sources of revenue?
Answer:
The Company Social Konnection Incorporation (SKI) has many sources to earning revenues and making profits. One of these sources was the revenue from advertising efforts. The SKI Company generates revenues through its advertising campaigns by creating advertising space on its own website and other mobile apps and sells those spaces to the advertisers through advertising agencies and directly. The revenue generation was depended upon the number of views the ad receives or the times the ad was clicked by the user. The company recorded its revenues in the period in which the numbers of clicks were made.
The advertisements were purchased directly from the SKI advertisement website at standard rates with the backhand support from the SKI Company’s ad delivery platform. As stated in the case study, most of the advertising revenues were generated by the sales team with the help of the adverting team, who creates more sophisticated advertising campaigns. As a bonus to the sales team for their efforts, they were given the extra commission for signing long term contracts. After the contract has been signed, the revenues should be recognized as credit revenues from the customers. After the contract signing event, the ads were manufactured and automatically uploaded to the company’s ad delivery platform. The company’s ad delivery platform automatically tracks the activities related to advertising and makes reports of the customers who are then billed.
Corporate Social Network Development and Hosting Revenue is another activity that generates revenues to the company after the acquisition of the CC, the company whose business was to provide the corporate social networking and hosting services to the corporate personnel. In which the company receives fee from the customers for development of the customer specified social media network along with the hosting agreement. The revenues should be recognized as the corporate approached the company and should be capitalized as the development is completed.....................
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