SecProbe.io

CORRESP
1
filename1.htm

     FOLEY & LARDNER LLP
ATTORNEYS AT LAW

     777 EAST WISCONSIN AVENUE

MILWAUKEE, WISCONSIN  53202-5306

414.271.2400  TEL

414.297.4900  FAX

www.foley.com

     October 5, 2005

     WRITER'S DIRECT LINE

414.297.5670

mplichta@foley.com  Email

     VIA EDGAR AND FACSIMILE

     CLIENT/MATTER NUMBER

044741-0103

Mr.           Jim B.
Rosenberg
Ms. Sasha S. Parikh
Ms. Mary Mast
U.S. Securities and Exchange
Commission
Division of Corporate Finance
Washington, D.C. 20549

 Re:
National
Research Corporation
Annual Report on Form 10-K for the year ended December 31, 2004
File
No. 000-29466

Ladies and Gentlemen:

        On
behalf of our client, National Research Corporation, a Wisconsin corporation (the
“Company”), set forth below are the Company’s responses to comments of the
Staff (the “Staff”) of the Securities and Exchange Commission (the
“Commission”) set forth in the Staff’s letter, dated September 15,
2005, with respect to the above-referenced Annual Report on Form 10-K. The numbered
items set forth below repeat (in bold italics) the comments of the Staff reflected in the
comment letter, and following such comments are the Company’s responses (in regular
type).

        We
are also enclosing the Company’s written statement requested by the Commission.

Form 10-K for Fiscal
Year Ended December 31, 2004

Note 1. Summary of
Significant Accounting Policies Revenue Recognition, page 24

          1.

          Please tell us why it is appropriate to use the percentage of completion
          method of accounting related to your performance  tracking
          services, the NCR+Picker Learning Network and your custom and other research
          projects and the completed contract  method of accounting
          for your Market Guide contracts. Please note that SOP 81-1 is not intended
          to apply to “service  transactions.”

Response:

In
future filings, the Company will revise the revenue recognition disclosure to remove
references to SOP 81-1 terminology. Reference to the “percentage of completion
method” will be modified to “proportional performance method” and “on
a completed contract basis” will be modified to “when the Market Guide is
delivered to the principal customers.” As explained further in the following
paragraphs, the Company does not apply the guidance of SOP 81-1 to its revenue
recognition.

BOSTON

BRUSSELS

CHICAGO

DETROIT

JACKSONVILLE

LOS ANGELES

MADISON

MILWAUKEE

NEW YORK

ORLANDO

SACRAMENTO

SAN DIEGO

SAN DIEGO/DEL MAR

SAN FRANCISCO

SILICON VALLEY

TALLAHASSEE

TAMPA

TOKYO

WASHINGTON, D.C.

WEST PALM BEACH

Mr. Jim B. Rosenberg
Ms. Sasha S.
Parikh
Ms. Mary Mast
October 5, 2005
Page 2

We
respectfully advise the Staff that the Company evaluates each of these revenue streams
based on criteria established in Staff Accounting Bulletin No. 104 Revenue
Recognition (“SAB 104”). These criteria include persuasive evidence that an
arrangement exists, delivery has occurred or services have been rendered, the price is
fixed or determinable, and collectibility is reasonably assured.

The
Company recognizes revenue from its performance tracking services, the NRC+Picker Learning
Network and its custom and other research projects using the proportional performance
method pursuant to SAB 104. These services typically include a series of surveys and
deliverable reports in which progress can be reliably tracked and the customer is
obligated under the contract to pay for the services as they are performed. The Company
recognizes the revenue based solely on output measures or key milestones such as survey
set up, survey mailings, survey returns, and reporting. The proportion of revenue
recognized by the Company is based on the level of completion of these output measures.

The
Company recognizes revenue related to Market Guide contracts upon delivery of the guide to
the customer pursuant to SAB 104. The Market Guide services are contracted on a final
results only basis. There are no defined intermediate progress steps.

          2.

          With regards to your Market Guide contracts, please tell us why it is
          appropriate to defer the direct costs of preparing the
          survey data for the Market Guide until delivery. It appears that costs
          should be expensed as incurred. Provide us the
          authoritative accounting literature you are using to defer the costs.

Response:

As
noted above, the Company defers recognition of revenue related to Market Guide contracts
until delivery of the guide to the customer. Similarly, the Company’s policy is to
defer direct and incremental costs related to fulfilling the terms of such contracts.
Topic 13.A.3.f. of SAB 104 acknowledges that direct and incremental contract costs may be
deferred if such costs bear a direct relationship to the performance of services specified
in the contract. The Market Guide contracts are enforceable contracts where the price is
fixed and delivery of the guide is expected at a certain point in time. The Company
primarily receives payments prior to the delivery of the Market Guide to the customer. The
deferred costs are evaluated against contracted revenue to assure recoverability of the
deferred costs. Consequently, the Company believes such deferral is appropriate under the
guidance of SAB 104.

* * * *

Mr. Jim B. Rosenberg
Ms. Sasha S.
Parikh
Ms. Mary Mast
October 5, 2005
Page 3

        If
the Staff has any questions with respect to any of the foregoing, please contact the
undersigned at (414) 297-5670 or Russell E. Ryba at (414) 297-5668.

Very
truly yours,

/s/ Mark T.
Plichta

Mark T. Plichta

Enclosure

 cc:
Michael
D. Hays
Patrick E. Beans
  National Research Corporation
Benjamin F. Garmer, III
Russell E.
Ryba
  Foley & Lardner LLP
Alexi A. Wellman
  KPMG LLP