Dear All,

Can any one give their opinion on the below:

The organization is charging license cancellation fee for each
customer’s license cancellation. What if customer ran away without
canceling license. Now the Organization wants to cancel on their own
and charge license fee and recognize revenue and provide against
doubtful debts. In my opinion no need of license cancellation charged
to customer.

Best Regards,

Hemant

Hi Hemant,The revenue should not be recognized because it is NOT probable that
the economic benefits associated with the transaction will flow to the
entity.License cancellation fee should be classified as a service type
revenue, governed under IAS 18. As at the point of recognition (ie
cancellation of licenses), we assess the if it is probable that the
economic benefits associated with the transaction will flow to the
entity. If the customer “ran away”, there is no such probability.As such, I think it imperative that revenue should not be recognized.Regards

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