1- a. According to ASC 605-25-25-5 , a delivered item in an arrangement with multiple deliverables shall be considered a separate unit of accounting if the following criteria are met:
* The delivered item or items have value to the customer on a standalone basis, which is satisfied in this case. * When vendor-specific objective evidence or third-party evidence of selling price for deliverables is absent, the vendor is allowed to give an objective estimation of the price of deliverable unit on standalone basis (in accordance with ASU No.2009-13), which is generally satisfiable. * If the arrangement includes a general right of return relative to the delivered item, where the delivery or …show more content…
b. According to ASC 985-605-25-88, If an arrangement to deliver software or a software system, either alone or together with other products or services, requires significant production, modification, or customization of software, the service element does not meet the criteria for separate accounting set forth in paragraph 985-605-25-78. The entire arrangement shall be accounted for in conformity with the relevant guidance in Subtopic 605-35 (in reference to contract accounting.)
605 Revenue Recognition
> Contract Accounting
ASC 985-605-25-89 provides that in applying contract accounting, the vendor shall use either the percentage-of-completion method or the completed-contract method.
3- a. According to 985-605-25-6 , if an arrangement includes multiple elements, the fee shall be allocated to the various elements based on vendor-specific objective evidence of fair value, regardless of any separate prices stated in the contract for each element. Vendor-specific objective evidence of fair value is limited to the following: I. The price charged when the same element is sold