Abateer company provides interior design services for residential and commercial customers. Assume Abateer entered into the following contracts during the year:

1. A contract with a family renovating their home. The contract specifies that Abateer will provide a general initial consultation for the family. The information obtained in the initial consultation will assist with ensuring the design advice matches with the family’s style as the renovation progresses. Abateer collected a nonrefundable deposit of $5,000 that will be held until the end of the contract and offset against the final bill owing. The total design fee for the contract is $15,000.

2. A contract with a home builder to deliver a report outlining designs plans for the builder’s model homes as well as consultation, which will be charged on a per-hour basis after the initial design plans are delivered. The total contract price is $25,000, which includes an allocation of $5,000 for the upfront design and the remaining amount for consultation (charged on a per-hour basis). Individual design plans are commonly sold separately to customers. A nonrefundable fee of $7,500 was collected prior to commencing any work on the report. 

Required:

Using the five-step model, determine the most appropriate time to recognize revenue relating to the upfront fee.