Software arrangements range from those that provide a license for a
single software product to those that, in addition to the delivery of software or a software system, require significant production, modification or customization of software. If an arrangement to deliver software or a software system, either alone or together with other products or services, requires significant production, modification, or customization of software, the entire arrangement should be accounted for in conformity with Accounting Research Bulletin (
ARB) No. 45,
Long-Term Construction-Type Contracts, using the relevant guidance herein, and in SOP 81-1,
Accounting for performance of Construction-Type and Certain Production-Type Contracts.
Shorter version - Software arrangements may include:
- Just software
- Software, services & support
- lots of different combinations
If contact accounting does not apply, SOP 97-2 specifies four criteria that must be met prior to recognizing revenue for a single-element arrangement or for the individual elements within the scope of SOP 97-2 in a multiple-element arrangement.
- Persuasive evidence of an arrangement exists.
- Delivery has occurred.
- Vendor's fee is fixed or determinable.
- Collection is probably.
