ACCOUNTING CASE - Based on-8 of the Accounting Standards...

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ACCOUNTING CASE: VELOCITY CELLULAR To: Velocity Cellular From: Group 12 Subject: Accounting Use of the Activation Card Issue 1: Is the activation card a separate deliverable under ASC 605-25? Response: Issue 2: Is the activation card a separate unit of accounting? What are the conditions/criteria that must be met to qualify as a separate unit of accounting? Response: Issue 3: Assuming a separate unit of accounting can be established, what is the best evidence of fair value under 605-25-30? Response: The Power Starterpack will be given to the consumer at a non-refundable price of $200. This includes both a new activation card and a prepaid voucher (both of which are non-refundable).
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Unformatted text preview: Based on 605-25-30-8 of the Accounting Standards Codification, For a deliverable not yet being sold separately, the price established by management having the relevant authority (it must be probable that the price, once established, will not change before the separate introduction of the deliverable into the marketplace). It can be argued that the best evidence of fair value is $200. The prepaid voucher is used as an incentive for consumers to purchase this new, completely voluntary service card....
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