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Technology Alerts — Challenges Associated With Applying the New Revenue Standard

Estimating Stand-Alone Selling Prices for Term Licenses and Postcontract Customer Support (February 2019)

Technology Alert
February 28, 2019
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Technology Highlights — Challenges Associated With Applying the New Revenue Standard: Estimating Stand-Alone Selling Prices for Term Licenses and Postcontract Customer Support

Footnotes

1
For titles of FASB Accounting Standards Codification (ASC) references, see Deloitte’s “Titles of Topics and Subtopics in the FASB Accounting Standards Codification.”
2
Certain software products were accounted for under ASC 605-25 after the adoption of FASB Accounting Standards Update No. 2009-14, Certain Revenue Arrangements That Include Software Elements — a consensus of the FASB Emerging Issues Task Force (codified in ASC 985-605 and based on EITF Issue No. 09-3, “Research and Development Assets Acquired in an Asset Acquisition”). Under ASC 605-25, an entity could use other methods in addition to vendor-specific objective evidence to determine the selling price of a deliverable.
3
Even when similar products do exist, reliable pricing information may not be available for determining SSPs under a market-based approach.
4
If B had determined that pricing for its software product is highly variable under ASC 606-10-32-34(c)(1) and that an observable SSP exists for PCS, it would have been reasonable for B to conclude that a residual approach is appropriate. This approach may yield an answer similar to the one resulting from the value relationship approach described above. The use of a residual approach will be discussed in a subsequent publication.