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I saw that Cristyn asked about booking multi year settlement dollars
We sue pollutors under the Clean Water Act. As a part of settlements we get payments or book a recievable up front to pay us to monitor their future compliance.for, say, the next three years. I think that our accounting should record this as deferred or unearned income on the balance sheet and recognize the revenue as it is earned each year under the compliance agreement. Pevious to me the organization booked it all when it was recieved. I would love your opinions and rationales
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1 Reply
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Under accrual accounting, deferred revenue may be appropriate when the organisation has not yet earned the full amount. Recognising everything upfront could distort the results for both the current and future years. Keeping the timing clear can make financial reporting much easier to understand.
