United States

Issues In-Depth: Implementing the New EITF Consensuses on Multiple Element Revenue Arrangements

Oct 19, 2009
From the Financial Reporting View

This edition of Issues In-Depth describes and provides implementation guidance about the recently issued FASB Accounting Standards Updates No. 2009-13, Multiple-Deliverable Revenue Arrangements, and No. 2009-14, Certain Revenue Arrangements That Include Software Elements. (The EITF previously deliberated the provisions of these ASUs as EITF Issues No. 08-1, "Revenue Arrangements with Multiple Deliverables," and No. 09-3, "Certain Revenue Arrangements That Include Software Elements," respectively.)

ASU 2009-13 requires a vendor to allocate revenue to each unit of accounting in multiple element arrangements based on the relative selling price of each deliverable. It also changes the level of evidence required to separate deliverables by allowing a vendor to make its best estimate of the standalone selling price of deliverables when more objective evidence is not available.

ASU 2009-14 excludes sales of tangible products that containessential software elements from the scope of revenue recognition requirements for software arrangements. Tangible products no longer will be within the scope of FASB ASC Subtopic 985-605, Software-Revenue Recognition.

These ASUs will allow many vendors to recognize revenue earlier for many revenue transactions involving multiple deliverables and for sales of software-enabled devices. The ASUs are effective for arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption and retrospective application are permitted.

Read Issues In-Depth: Implementing the New EITF Consensuses on Multiple Element Revenue Arrangements