As per the SEC,nonrefundable up-front initiation fees to activate services contracts (e.g.,telecommunications services)may be immediately recognized as revenue as long as the fees are greater than the costs to activate the contracted services.

Question

Quizplus · Accepted Answer

According to the SEC and accounting principles generally accepted in the United States (GAAP), nonrefundable up-front fees, such as initiation fees for activating service contracts, should not be recognized as revenue immediately upon receipt. Instead, they should be deferred and recognized over the period during which the service is provided, ensuring the revenue recognition principle of matching revenues with the services or goods provided is adhered to.

As Per the SEC,nonrefundable Up-Front Initiation Fees to Activate Services