AUDIT 2: Auditing Revenue and Cycle for Mesmerizing Marketers Analysis

This report provides an in-depth analysis of the revenue recognition process for Mesmerizing Marketers (MM), a marketing company. The report focuses on the application of ASC 606, outlining the five-step process for revenue recognition based on a case study involving a contract with Stone. The report examines the identification of contracts, performance obligations (TV commercial, app, and Facebook page), and transaction prices. It also addresses the accounting treatment of a potential bonus based on app downloads. The analysis considers the specific details of the contract, including payment terms and the independent nature of the services provided by MM. The report concludes by determining the most appropriate method for recognizing the bonus revenue based on the likelihood of the app downloads reaching the specified threshold.

Running head: AUDIT 1
Auditing Revenue and Cycle
Student’s name
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Instructor’s name
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AUDIT 2
Purpose
MM should account for the offering above relying on the percentage of the method
regarding completing the contract and also based on percentage of the completed service (Javed,
2013). It is revealed that on 30th November, 20x5, MM realized 50% of the revenue during the
period of contract inception as it is stated in the case (Durukan, 2016). It is relevant to have
knowledge on the process of five steps outlined in the ASC 606 -10 – 05 – 4 for one to
understand the current standard of ‘revenue recognition’ (Brown, 2010).
Background
Mesmerizing Marketers also known as the MM is a company that operates in the
marketing sector that provides all the marketing requirement to a number of customers. The
company majorly deals in production of TV commercial, an App and Facebook page (Dchopra,
2018). All these are marketed at specified prices either when products are sold separately or in a
combination. However, these products are differentiated and never related to each other and this
implies that they all function interdependently (Chmberlin, 2011).
Discussions
The following steps can thus be important when MM is accounting for the offering of
Stone in the new revenue recognition.
The first step would be that MM should point out the contracts with its customer. In this
case, a contract refers to the agreement made between two or more parties that are enforceable
and every party is obliged to follow it. In this topic, guidance means all the contracts that have
been made between the two parties that is, MM and Stone and the criteria is met (Chmberlin,

AUDIT 3
2011). According to the contract, the contract between MM and Stone seems to be clear verbal
implying that the criteria of the contract is in line with the case and so it would be better to utter
out that there is a contract between parties (Dchopra, 2018). The second step requires identifying
the contract performance functions. The contract contains promises to take the goods and
services to the customer. In case the goods and services are different, the promises become
‘performance obligations’ and are separately or differently accounted for (Walker, 2011). A
product or service alone or combined with other commodities that are available readily to the
customers and the company promises to transfer the products or services to the customer’s
premises, then they are identified separately identified from other contract promises (Brown,
2010). However, if the goods are separately identified, the chances of independently producing
economic benefits are higher. In the case, it has been clearly indicated that the app, TV
commercial and Facebook page are never related. They are priced differently and they can be
sold differently or even together. In addition, Stone was given a chance of deciding what they
should buy and what they wouldn’t wish to buy and so other items will not be affected in the
process (Durukan, 2016). According to the contract, there are three ‘performance obligations’ to
be selected and these include; Facebook page, TV commercial and the App.
The third step is to find out the price of transaction , in this case, the ‘transaction price’ is
the consideration amount within the contract that a firm forecasts to be given a title in exchange
for transporting the goods and services promised to the customer (Javed, 2013). Sometimes, the
price of transaction can either be a ‘static’ amount of customer consideration or it may have a
changing consideration or a consideration that is not money or cash (Walker, 2011). The sales
consideration that MM can expect is the $ 1.5 for marketing the commodity according to the
agreement.

AUDIT 4
Conclusions
According to MM, it does not think the customer of Stone can ever download the app
500k times within the first month. The reason for MM is that the base of Stone’s customer never
accepts currently developed technology as quick as possible and so MM predicted that it will
take at least three months for the users of Stone to start downloading the app. However, in case
the prediction of MM changes and the app sold by stone is downloaded more than 500k times in
the first month, then MM will receive $ 250k as a bonus for one time.
In ASC 606-10-32-8 explains that any method can be employed by MM to accurately
predict more amount on consideration to be gained. But since the prediction for MM that
according to the base of a customer of Stone that the one- time bonus will not be got, then the
most ‘likely amount’ method should be employed by MM so as to recognize a revenue of zero
bonus.

AUDIT 5
References
Brown, S., (2010). Mesmerizing marketing: A compact cultural historyEuropean Business
Review 20(4):350-363. Retrieved from :
https://www.researchgate.net/publication/235291988_Mesmerizing_marketing_A_compa
ct_cultural_history
Chmberlin, M. (2011). The Johnny Depp Guide to Mesmerizing Marketing. Retrieved from:
https://www.copyblogger.com/author/martyn-chamberlin/
Dchopra. (2018). Mesmerizing Marketers Revenue Recognition Case Study. Retrieved from:
https://www.platinumessays.com/essays/Mesmerizing-Marketers-Revenue-Recognition-
Case-Study/20359.html
Durukan, A., (2016). Use Of Architecture As A New Way Of Mesmerizing Tool Of Marketing
In Shopping Spaces.2nd Internatıonal Conference On New Trends In Archıtecture And
Interıor Desıgn. Retrieved from:
https://www.academia.edu/34148955/Use_Of_Architecture_As_A_New_Way_Of_Mesm
erizing_Tool_Of_Marketing_In_Shopping_Spaces
Javed, L., (2013). Online Marketing Through Consumers: A Study Of Effectiveness Of Various
Tools. British Journal Of Management Vol.1(4):11-19 . Retrieved From:
https://www.researchgate.net/publication/260105909_ONLINE_MARKETING_THROU
GH_CONSUMERS_A_STUDY_OF_EFFECTIVENESS_OF_VARIOUS_TOOLS

AUDIT 6
Walker, J.D. (2011), ‘QR Codes Are the Next Marketing Wave,’ Courier-Tribune, the
(Asheboro, NC). News Bank Access World News. Retrieved from:
http://asheboro.couriertribune.com/local_news/story codes are next marketing wave