Problem

(Revenue Recognition-Membership Fees) Midwest Health Club (MHC) offers 1-year memberships. Membership fees are due in full at the beginning of the individual membership period. As an incentive to new customers, MHC advertised that any customers not satisfied for any reason could receive a refund of the remaining portion of unused membership fees. As a result of this policy, Richard Nies, corporate controller, recognized revenue ratably over the life of the membership. MHC is in the process of preparing its year-end financial statements. Rachel Avery, MHC's treasurer, is concerned about the company's lack- luster performance this year. She reviews the financial statements Nies prepared and tells Nies to recognize membership revenue when the fees are received.

Answer the following questions (# your responses):

1. What are the ethical issues involved?
2. What should Nies do?

Read and reply to one student's response. This is an automatic assigned peer review. Your reply should be a based on your analysis of the student's response (min. 100 words). You may comment on why you agree or disagree with the response, what sort of evidence supports or refutes their position, or you may ask questions related to their response.