Awesome Videogames, Inc. Management’s Discussion and Analysis

Awesome Videogames, Inc.
Management’s Discussion and Analysis
December 31, 2016

How Revenues get Recognized

Retailers can recognize revenues under following circumstances:

• We have enough evidence of an arrangement;
• We provide product or service to the customer;
• We collect fees from customer; and
• The amount of fees is fixed.

Retailers sell products with “street date”. Street date is the earliest date selling products.  Retailers recognize revenues: (1). On the later of the street date; (2). On the products sold date.

        Revenue arrangements have multiple deliverables^[1] that include:

• Product sales with software and hardware deliverables (e.g. peripherals or ancillary collectors’ items sold with “boxed” software);
• Sales of Excellent Adventure Videogame boxed products, best-selling expansion packs and additional value-added services.

         We recognize revenues. Product sales include the sale of physical products, digital full-game downloads and other enhancements. There are two circumstance:

We recognize revenues from excellent product sales of the Awesome Videogames company. We deduct the estimated allowance for returns and price protection. Then we record the revenues on the income statement. Everything is in accordance with Generally Accounting Practices.        

To judge whether functionality of products is an unimportant deliverable, we evaluate every product including:

• Software products with online functionality (because online functionality is important to gameplay); and
• A part of a hosted service arrangement.

These products don’t include the additional software product. If functionality of products is an unimportant deliverable, we consider performance obligation to extend the sale of the game. Some online functionality doesn’t have VSOE of fair value, and the component of title doesn’t have charge. We defer and recognize the revenues from the sales of title and the costs of sales over the service period. The costs of sales include manufacturing costs, software royalties and amortization, and intellectual property licenses, but it doesn’t include amortization of intangible asset.         

    Some software products is not critical to the product offering, so we consider these products to be inconsequential deliverables. We recognize the related revenues if the products meet the revenue recognition criteria.

Our expansion packs and value-added services benefit customers for Excellent Adventure boxed products. We recognize these revenues and subscription service revenues at the same time. We classify revenues in the income statement as:

The revenues recognition is in accordance with Generally Accounting Policies.