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Revenue Recognition 2010

Revenue Recognition 2010

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Published by Cindy Zhang

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Published by: Cindy Zhang on May 26, 2012
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03/07/2014

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Arrangements may include both software and service elements other than PCS services
which may include installation, training, or consulting. If an arrangement contains both
software and service elements, a vendor must determine whether the services can be
separated from the software for revenue recognition purposes. If the nature of the services

is such that the service element does not qualify for separate accounting treatment as a
service, the vendor must apply contract accounting, as described in ASC 985-605-25-88
through 25-107, to both the software and service elements (see “Software with signifcant
production, modifcation, or customization” on page 130). Criteria to consider in

determining whether the services can be separated from the licensed software are discussed

in ASC 985-605-25-78 and in the next section. If the service element can be separated,

the vendor should allocate arrangement consideration between the service and software

elements based on VSOE of fair value and recognize revenue related to services as they

are performed. If no pattern of performance is evident for the services, the revenue should

be recognized on a straight-line basis over the period the services are performed.

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