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SUBJECT: REVENUE ARRANGEMENTS CONTAINING SOFTWARE ELEMENTS
PRONOUNCEMENT ANALYZED: Accounting Standards Update (ASU) No. 2009-14
EFFECTIVE DATE: See later discussion
SUMMARY AND HIGHLIGHTS
ACCOUNTING STANDARDS UPDATE NO. 2009-14 AMENDS SUBTOPIC 985-605 TO EXCLUDE FROM ITS SCOPE ALL TANGIBLE PRODUCTS CONTAINING SOFTWARE AND NON-SOFTWARE COMPONENTS THAT OPERATE TOGETHER TO DELIVER THE PRODUCT'S ESSENTIAL FUNCTIONALITY.
INTRODUCTION
Accounting for products or services containing software that is considered to be "more than incidental" to the product or service as a whole currently falls within the scope of Subtopic 985-605, Revenue Recognition; arrangements for products or services containing software that is incidental to the product or service as a whole are outside the scope of Subtopic 985-605. Specifically, Subtopic 985-605 permits separation of elements only when vendor-specific objective evidence (VSOE) of fair value exists, with the fee for the arrangement allocated to the various elements based on relative fair values. Note that this differs from the guidance in Subtopic 605-25, MultipleElement Arrangements, as recently amended by Accounting Standards Update (ASU) No. 2009-13, Multiple-Deliverable Arrangements-a consensus of the FASB Emerging Issues Task Force, under which arrangement consideration is allocated to elements (i.e., deliverables) pursuant to the relative-selling price method (see Bulletin No. 2009-55 also dated October 2009).
To be consistent with amended Subtopic 605-25,...