MV-Link Contract Case Study

It is quite complicated to incorporate the GAAP criteria to the contract. The contact does not clearly identify what the $5,000,000 fee is for. One can imply that it provides PACE the exclusive rights to show these films in their own theatres. If that was the case then the $5,000,000 is realized when the contract is signed however $2,500,000 is earned at the time of signing the contract and the remainder is not earned until PACE uses these rights for six months. They will recognize it as revenue when it is received in cash. MV-Link has fulfilled its part of the contract. There is another issue with the revenues that are generated under this contract which detail the number of times that PACE reports showing the films. They have been able to
show the movies 10,925 times in their theaters of the total 54,150 total showings expected on the contract. When we analyze this it can be presumed that PACE may not be meeting the terms of the contract to show the movie KRII-V 18 times per 42 showings of Kombat Rex. In those months that movie has been showed 8,550 times. This creates an issue. As stated in the contract, MV-Link has to receive a statement that shows which theatre has fulfilled the contract terms to show each of the films 18 times while showing Kombat Rex 42 times. If this is correct, the MV-Link may be receiving more money from PACE because they have not lived to the terms of the contract. This could be a breach of contract. The total receivable for the showings come out to $5,462,500. This was paid in January. This data proves that this amount does reach the expected goals for revenue recognition. This amount was earned since MV-Link gave PACE the films for showing and they were shown in their theaters all across the United States.

Works cited
“The Comprehensive Guide to Understanding GAAP.” Accounting.com. N.P.,n.d. Web. 01 Mar. 2017.
Staff, Investopedia. "Revenue Recognition." Investopedia. N.p., 12 June 2015. Web. 02 Mar. 2017.