Billy’s Beats Inc.

In: Business and Management

Submitted By ishani85
Words 535
Pages 3
Name :
Course: 5999 – Seminar in Professional Accounting Practice – Spring 2012
Subject : Eye Vision Inc
Basic Revenue Recognition Principles
ASC 985-605 stipulates that the following four criteria must be met before revenue can be recognized in software arrangements (provided that significant production, modification, or customization of software is not required):
• Persuasive evidence of an arrangement exists.
• Delivery has occurred.
• The vendor’s fee is fixed or determinable.
• Collectibility is probable.
While these criteria may be consistent with those in other revenue recognition literature (e.g., SAB Topic 13), an entity may apply them to software arrangements under ASC 985-605 differently than it would to arrangements under other literature. See Q&A 1-03 and Q&A 1-04 for comparisons between ASC 985-605 and SAB Topic 13. 1. Is Eye Vision’s arrangement with Holland Hospital within the scope of ASC 985-605 Software: Revenue Recognition?
Software Revenue Recognition is now included in FASB Accounting Standard Codification (ASC) 985-605 Software Revenue Recognition. The scope of this guidance originally included an arrangement to sell a clear view laser product along with software that is more than incidental to the product as a whole. Given the advance in technology over the last decade however more arrangement to sell the clear view laser product were being captured in the scope of this guidance that what may have been intended when it was originally written in 1997. This caused concern because the existing software guidance in ASC 985-605 is considered more restrictive then that for sale of a clear view laser product that excludes software that is more than incidental to the product.
Software deliverables — The arrangement consideration allocated to the software deliverables as a group is further subject to separation and allocation…...

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