We're a software company. Recently, we've rolled out our subscription model in addition to our traditional on-premise licensing. In the first couple of months of
Will volume discount for future purchase create an additional element for revenue allocation under EITF 08-1?
Answers
Hi,
I'd say if your volume discount schedule is sufficienty objective and is applied consistently, you could argue that the additional volume discouts no not grant the customer a material right that must be accounted for separately as a future incremental discount.
Keep in mind that the software elements are in the scope former 97-2 (ASC 985) and in a combined deal with software and SAAS elements you might have to allocate the transaction price to the software elements as a group on a relative selling price basis to then in a second step further allocate the transaction price within the software group (probably based on the residual method).
Thanks Miklos. I think that is the answer. If the customer is not provided a discount that is incremental to that which other customers usually receive (for example a customer is given the typical discount off the vendor’s list price) no incremental value has been provided to the customer and the future discount is not considered incremental.
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