Accounting
period has expired. It could be argued that instead of one bundle of goods being sold (which would argue for recognition on delivery), four products are being sold—the initial software plus the technical support plus the two upgrades. In this case revenue would be recognized separately for each component (upgrades when delivered to the customer, technical support over the life of the service contract).
e. Revenue could be recognized when the fee is paid, which presumably is in advance, it could be recognized over time, on the basis that the fee is compensation for being available, not for actually providing any services, or at the completion of the period of coverage. If the firm was not going to be compensated additionally for any work that was provided, an argument could be made that the costs of providing the services are not known until the time expires. Given the facts of the situation, the latest alternative that could be defended for tax postponement purposes is a monthly recognition of the revenue as it is earned. At this point the revenue is earned since the client has had access to a lawyer if and when required, the amount of revenue is known and costs (which would be mainly period costs) would have been incurred and expensed in the period.