We are a software company that sells out-of-the box software, and PCS and
Any way to get away from having to defer rev rec (on total value of the sale) until training is performed?
Answers
You should be able to separate the training and recognize revenue on the SW and PCS as you have VSOE on the training portion.
There is no way to properly avoid deferral on the portion of the price attributable to the training services, and an allocation is required if sold together. If you sell only separate contracts for the software license and for training you get the same result, as the revenue on the training contract cannot be recognized until the services are provided. The
Ok, here's one problem with Anonymous posts, questions (on a posting) that you yourself don't want to post publicly. Normally I'd send the poster direct a quick question, but I can't here....
But, hey you can't know everything and one sometimes can't find the answer easily on the Internet (which is why using acronyms isn't always the best idea).
So, what is PCS mean in your usage (I know a lot of "PCS" acronyms, but none make sense for this)?
Read up on SOP 97-2 and EITF 00-21 (Emerging Issues Task Force from FASB). You can get this off the internet and download as PDF. Both these documents relate to software and bundling.
Also GAAP is moving away from VSOE and toward "
Don't focus much bandwidth on the deferral but rather figure out a way to accelerate recognition, especially with PCS type activity. In a prior life, I wrote an algorithm the did just this for PCS Tech support (recognized 67% of PCS revenue within the first 90 days of deferral based on Call center metrics). GAAP does not limit you to straight line amortization of PCS contract costs IF you can develop a more accurate pattern.
Wayne, PCS (Post Contract Services) usually Tech support.
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Thanks Steve.... too many acronyms, too many worlds we live in, duplication has to be expected :)
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