P2 Velocity Cellular instructions by TR59h6Z


									                                          Accounting 381
                        Project 2: Velocity Cellular Case Study (20 points)

Due:           Thursday, December 3 (at beginning of class). Also, please be prepared to discuss the
               case and your group’s solution in class on this date.

Groups:        Please work in groups of 3-5 students (submit 1 discussion per group). You may select
               your own groups. Please contact me if you are having difficulty finding a group.

Required:      Prepare a discussion outlining the alternatives for revenue recognition for both the
               prepaid voucher and the activation card in the Velocity Cellular case. Relying on the
               applicable guidance, discuss the appropriate way for Velocity Cellular to recognize
               revenue for both the activation card. Your discussion should include cites to the
               applicable guidance and how it applies to Velocity Cellular’s transactions. Your
               discussion should be no more than 3 pages in length.

Applicable Professional Pronouncements:
    ASC 605-25: Revenue Recognition: Multiple Element Arrangements (Emerging Issues Task
       Force Issue No. 00-21). Available on FASB Codification
    SEC Staff Accounting Bulletin Topic 13, “Revenue Recognition” (SAB Topic 13). Available
       on the SEC website (http://www.sec.gov/interps/account/sabcodet13.htm )

Additional Notes
1. Your discussion should begin by discussing alternatives for recognizing revenue for the activation
   card. This case would be considered a multiple element arrangement and thus there are at least 2
   alternative ways to think about revenue recognition:

       a. Alternative 1: The activation card is a separate deliverable than the prepaid voucher and a
          separate unit of accounting in accordance with ASC 605-25 (Issue 00-21).

       b. Alternative 2: The activation card is not a separate deliverable from the prepaid voucher
          and not a separate unit of accounting in accordance with ASC 605-25 (Issue 00-21).

   Given the information presented in the case, you should discuss potential arguments that could be
   made supporting each alternative.

2. The second part of your discussion should focus on which alternative you believe to be the correct
   way to recognize revenue given the applicable guidance. If you believe there is not sufficient
   information provided in the case to identify the appropriate way to recognize revenue, then choose
   an alternative and state any assumptions you are making in your conclusion.

3. You do not need to use a particular format to prepare your discussion. However, your arguments
   should be clearly presented and include references to applicable guidance (references may be
   general or specific).

4. The discussion is NOT required to be 3 pages – the instructions state that it should be no more than
   3 pages.

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