Business / REVENUE RECOGNITION WHEN CUSTOMER ACCEPTANCE CRITERIA CLAUSES EXIST
REVENUE RECOGNITION WHEN CUSTOMER ACCEPTANCE CRITERIA CLAUSES EXIST
Research Paper REVENUE RECOGNITION WHEN CUSTOMER ACCEPTANCE CRITERIA CLAUSES EXIST and over other 20 000+ free term papers, essays and research papers examples are available on the website!
Autor: people 03 August 2011
Words: 314 | Pages: 2
Revenue Recognition under US GAAP
Software arrangements may include a contractual acceptance provision that states the acceptance criteria or a specific period in which the product must be accepted or returned. Conversely, implicit acceptance provisions may also exist based on the vendor's customary business practices. Paragraph 20 of SOP 97-2 states that if uncertainty exists about customer acceptance of the software, license revenue should not be recognized until acceptance occurs.
TPA 5100.67 (which incorporates SAB 104 acceptance clause guidance) provides some interpretation of this paragraph and states that it was not intended to suggest that the existence of an acceptance clause would preclude revenue recognition until formal customer acceptance has occurred.
In these situations, all available evidence should be considered when a determination is being made of the effect that acceptance language in an arrangement or the implicit existence of an acceptance period has on revenue recognition. Generally, if the acceptance criteria are based on the product's meeting normal published specifications and the acceptance period is short, revenue recognition would not be precluded.
TPA 5100.67 refers to the guidance provided in SAB 104 and the associated frequently asked questions and includes a discussion of other factors that should be considered. These include:
•Historical experience with similar types of arrangements or products;
•Whether the acceptance provisions are specific to the customer or are included in all arrangements;
•The length of the acceptance period; and
•Historical experience with the specific customer.
When considering the above it is important to understand and assess the effects of the following areas on the acceptance provisions:
•The length and complexity of the installation period;
•The significance of modifications made to the software during the period between its delivery and customer acceptance;
•The length of the period between (1) delivery and/or installation and (2) the expiration of the acceptance period; and
•Whether the product is a new or existing product. ...
Get instant access to over 50,000 Papers and Essays