Our company enters int contracts with customers that often span many months, and often with complex billing arrangements such as Advanced Billing, Milestone Billing, and Hold-Backs. Corporate is telling us that we must recognize revenue when we invoice, and as long as it is in agreement with the contract, we are with our legal rights and safe from a GAAP and SOX perspective. Additionally, they want us to move costs around in such a way as to always match costs with this revenue, regardless of what (if any) costs have been incurred.
I disagree.
For advanced billing (e.g. invoice to customer, per contract, with no services redered, prior to any work performed or costs incurred), should not the revenue be deffered until actual work is performed?
For a Hold-Back (e.g. product/service deliverd, all costs incurred, but no invoicing allowed per the contract until customer buy-off even though title has transfered to customer via FOB-Origin), shouldn't the revenue be recognized at time of shippment even if the full amount is not invoiced until later?
What about costs? in the Hold-back situation above, are you allowed to take costs out of COGS when the product ships, then reverse it when we later invoice in another period as to match up revenue and costs - thus maintaining margins?
Any input or references on these issues would be greatly appreciated!
-NAS
I disagree.
For advanced billing (e.g. invoice to customer, per contract, with no services redered, prior to any work performed or costs incurred), should not the revenue be deffered until actual work is performed?
For a Hold-Back (e.g. product/service deliverd, all costs incurred, but no invoicing allowed per the contract until customer buy-off even though title has transfered to customer via FOB-Origin), shouldn't the revenue be recognized at time of shippment even if the full amount is not invoiced until later?
What about costs? in the Hold-back situation above, are you allowed to take costs out of COGS when the product ships, then reverse it when we later invoice in another period as to match up revenue and costs - thus maintaining margins?
Any input or references on these issues would be greatly appreciated!
-NAS
