Hardware extended warranty revenue recognition for years 2-5
I have a case here and need help in understanding the following:
- Extended Warranty for hardware support is purchased by Integrator for 4 years to cover warranty for years 2, 3, 4, and 5. Lets say the cost for the extended warranty is 150k. Assume it gets invoiced by distributor to Integrator in 2018 - expense
- The Integrator invoices the Customer for 200k in 2018. Net profit of 50k - revenue
- The warranty services is provided directly by Manufacturer
- The customer (end user) deals directly with Manufacture for warranty related issues on hardware
- Can the complete sales of 200k be recognized in 2018?
- Can the complete profit of 50k be recognized in 2018?
- Can the director of the business decide how accounting books this transaction?
Thanks for reply!
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