This question was asked in a post 4 years ago before the new revenue recognition laws. I have a client who is a VAR who will resell one-year service contracts from Zebra, Honeywell and other manufacturers of handheld and mobile devices. The VAR does not have any service obligations under the contracts- all the servicing is done by the manufacturers - the service contract is between the manufacturer and the customers of the VAR. The VAR had been recognizing the entire revenue and cost at the time of the sale. Does that change now under step 5 of the new revenue recognition accounting standards. One test is the customer receiving benefits from an entity (the manufacturer of the equipment) over time, which would indicate that revenue gets recognized over time, rather than at point of sale. If revenue should now be deferred over time, would it also be the same for US tax purposes? Thanks for your insights. Jon Paul [email protected] 847-372-1963
