Upfront and Center

Can I recognize upfront, nonrefundable fees immediately? StaffMay 4, 2001

Q: We charge our clients a one-time, nonrefundable fee to sign up to use our service (online distribution of press releases, including assembling distribution lists from our media database). We believe we can recognize that revenue immediately because the membership fee is not tied to any underlying term and is nonrefundable. Are we correct in our treatment of these fees? Can you reference us to the authoritative literature on this issue?

Name Withheld
Fairfield, Conn.

A: If your service is an ongoing delivery of press release support over an agreed fixed period of time, you will need to recognize the revenue from these transactions rateably over that fixed period. Refundability and upfront payment are considerations in determining revenue recognition according to the Financial Accounting Standards Board and the SEC’s Staff Accounting Bulletin 101. However, the significant parameter to consider in your case is that delivery has occurred and services have been performed. You can find specific examples for this and other revenue management questions at, an information portal sponsored by DiCarta and the Financial Executives Institute.

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Scott Martin
President and CEO, DiCarta Inc.

Editor’s note: See also Hard Lessons (CFO Magazine, September 2000).

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