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Consider promotions that you may often hear offered to
prospective consumers by competitive firms. Among some of the
most common promotions are frequent flier miles and mobile phone
“roll-over” minutes. However, as consumers accept these offers, the
firm offering these incentives must record the potential customer’s
transaction as a “nonrevenue” transaction and carry forward the
contractual debt until such time that the customer uses it or the
benefit expires.

When an organization introduces a new promotion to a customer,
should the accounting department be proactive or reactive as these
promotional decisions are made, especially when the new promotional
offer could impact the organization financially? As you respond,
keep in mind that differing departments within organizations often
have competing interests, as the marketing department may advocate
a different position than the accounting department to senior
management. Also, discuss how the accounting department must
respond when new promotions are offered for which there is
currently no promulgated accounting literature.

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