Membership or subscription businesses, such as health clubs and magazine publishers, may inflate revenue by booking the full value of muliyear contracts in the first year of the contract.

Question

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Membership or subscription businesses may use a accounting method called "deferred revenue" or "unearned revenue" to book the full value of multiyear contracts in the first year of the contract. This can inflate revenue in the short term but may lead to lower revenue in the future years of the contract.

Membership or Subscription Businesses, Such as Health Clubs and Magazine