I recently joined my current company, a midsize company that executes "Milestone" Contracts. For instance, A $1,000,000 Contract with the following milestone: a. 30% upon sales (contract) acknowledgment; b. 20% upon final approved engineering drawings by customer; c. 40% upon completion, engineering test & certificates, are documented; d.10% when parts are ready to ship/stored in our inventory for later pickup. I do understand that all other Milestones except (a) are recognizably "DISTINCT"; however, considering that "acceptance of a sales contract" may or not be defined as a "DISTINCT" performance obligation, My question is: IF milestone (a), when billed, should it be (i) recognized immediately as revenue because the acceptance of the sales is distinct; OR (ii) should be credited towards unearned revenue? If (ii), at what point do we recognize it as revenue? I know you'd be asking why I am concerning myself with this level of compliance considering we're a private organization, though my company is private, but we have intention of going public thru a mini-IPO RegA+ offering. This is only but a requirement to ensure proper revenue recognition. I really appreciate all the response. Thank you!
