- 14 -
into refundable deposits or preclude their accrual as income.
Pursuant to Arizona's parol evidence rule and Mr. Goodson's
testimony, we accept petitioners' argument that Pepsi generally
conducted an investigation during the 60-day period following the
end of each calendar year. This part of Mr. Goodson's testimony
is consistent with the agreement in which Pepsi had 60 days to
pay the marketing funds following the end of each 6-month
period.7
We, however, reject petitioners' contention that the theater
company's right to the funds was dependent on Pepsi's approving
the funds, for it would require us to read a provision into the
agreement. The agreement simply states that the flex and
marketing funds were “contingent upon the Customer's complying
with * * * the * * * performance criteria”. Because the theater
company had a guaranty of retaining the flex and marketing funds
as long as it performed under the agreement, we do not consider
the flex and marketing funds paid in 1996 to be refundable
deposits as suggested by petitioners.8
7 The agreement did not explicitly provide that Pepsi had
60 days at the end of each 6-month period to pay the flex funds.
8 As to respondent's argument that the flex funds paid in
1996 for the first half of that year constituted advance
receipts, we note that the agreement provided that flex funds
were “earned” when paid; that provision could lead to the
conclusion that at the time the flex funds were received in 1996,
they were receipts on account of actual rather than expected
performance. See infra note 9 for our interpretation of the word
(continued...)
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