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Revenue XYZ Conpany is adopting ASC 606 and you're in charge of preparing the accounting...

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Question

Accounting

Revenue

XYZ Conpany is adopting ASC 606 and you're in charge of preparing the accounting adoption memos. For the purposes of this written assignment weve selected one areas of focus: identification of performance obligations, which is an area of utmost importance to the overall analysis as it drives many other conclusions around the adoption of ASC 606.

XYZ Company generally has two pricing structures and user groups:

  1. Blended (sticker) - Based on XYZ Company's standard Terms of Service, users (i.e., merchants) are charged 3.9% + 40c per transaction. Users bear risk of loss, though if users are unable to fulfill their obligation, XYZ Company must make the cardholder whole.
  2. IC+ - Users have a cost plus arrangement wherein XYZ Company earns a fixed markup for each transaction. Because the final cost (as calculated by XYZ Company's 3rd party partner) is variable and unknown until after month-end, users are billed an estimated amount during the month, with final invoices issued within one week of month-end. Otherwise, standard Terms of Service apply.

Prompt

Performance obligations

Prepare an accounting memo in which you determine what XYZ Companys performance obligation should be based on our standard Terms of Service.

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