Problem
Assessing Revenue Recognition Timing and Income Measurement Explain when each of the following businesses fulfills the performance obligations implicit in the sales contract and recognizes revenue. Identify any revenue measurement issues that could arise.
1. RealMoney Com, a division of TheStreet Inc., provides investment advice to customers for an up-front fee. It provides these customers with password-protected access to its website, where they can download investment reports. RealMoney has an obligation to provide updates on its website.
2. Oracle Corp. develops general ledger and other business application software that it sells to its customers. The customer pays an up-front fee for the right to use the software and a monthly fee for support services.
3. Intuit Inc. develops tax preparation software that it sells to its customers for a flat fee. No further payment is required, and the software cannot be returned, only exchanged if defective.
4. Electronic Arts develops and sells computer games. The company will provide a full refund within 24 hours after the game is first launched or within 14 days from the date of sale, if the game has not been launched. After that, there is no refund.