Writing Assignment: Revenue Recognition
Topic: AMC Fitness Inc., offers annual memberships. Annual membership fees are due in full right away – at the beginning of the membership period. AMC Fitness offers customers a full refund for any unused period if for any reason a customer is not satisfied. As a result of this policy, AMC Fitness Inc. recognized revenue ratably over the life of the membership rather than when the dues were received from the customer. AMC Fitness Inc.’s CEO, Jeff Rizzo, is not satisfied with the company’s performance this year and has requested that you, the Controller of AMC Fitness Inc., recognize the revenue when received rather than over the membership period. Requirements: Write a memo to Jeff Rizzo, the CEO of AMC Fitness Inc. addressing the issues identified below. This memo should be short and to the point (max 1-2 pages, single spaced). You will also be graded on how you organize the information. There are many options with how to bundle the “answers” you give; choose the option that would make the memo easiest to read, interpret, and implement by the user. There is no one right way, so it is perfectly fine for students to take different approaches to presenting the information.
1. Discuss the factors to be considered in determining when revenue should be recognized per Accounting Standards Update No. 2014-09 (Read chapter 18 and conduct additional research, as necessary. Be sure to cite your sources appropriately.)
2. Apply the above guidance to AMC Fitness Inc.’s facts.
3. Explain to CEO Rizzo what your decision is with respect to AMC Fitness Inc.’s accounting treatment concerning membership revenues. If you decide that the appropriate treatment is to recognize revenue over time, be sure to explicitly explain the criteria under GAAP that justifies your position.
4. Explain the ethical issues involved. If you conduct additional research for this memo and use any ideas that are not your own, be sure to provide a citation within the memo and add a works cited listing following your memo.
DON’T PLAGIARIZE
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