Evaluation of Whether a Fee is Fixed or Determinable

If a software vendor's participation in an end user customer's financing results in incremental risk that the software vendor will provide a refund or concession to either the end user customer or the financing party, there is presumption that the arrangement fee is not fixed or determinable. Any one of the following conditions or software vendor actions results in incremental risk and a presumption that the fee is not fixed or determinable:

1. Provisions that require the software vendor to indemnify the financing party above and beyond the standard indemnification provisions that are explicitly included in the software arrangement between the software vendor and the end user customer.
2. Provisions that require the software vendor to make representations to the financing party related to customer acceptance of the software that are above and beyond the written acceptance documentation, if any, that the software vendor has already received from the end user customer.
3. Provisions that obligate the software vendor to take action (such as to terminate the license agreement and/or any related services), on behalf of the financing party in the eveent that the end user customer defaults under the financing.
4. Provisions that prohibit or limit the ability of the software vendor to enter into another software arrangement with the customer for the same or similar product if the end user customer defaults under the financing.
5. Provisions that require the software vendor to guarantee, certify, or otherwise attest in any manner to the financing party that the customer meets the financing party's qualification criteria.
6. Software vendor has previously provided concessions to financing parties or to customers to facilitate or induce payment to financing parties.
7. Provisions that lead to the software vendor's guarantee of the customer's indebtedness to the financing party.

Evaluate fixed or determinable fees for resellers - because a reseller is not the ultimate user of software products, the following factors should be considered when evaluating whether the fee is fixed or determinable in arrangements with resellers:

1. Business practices, the resller's operating history, competitive pressurs, informal communications, or other factors indicate that payment is substantially contingent on the reseller's success in distributing individual units of the product.
2. Resellers are new, undercapitalized, or in financial difficulty and m ay not demonstrate an ability to honor a commitment to make fixed or determinable payments until they collect cash from their customers.
3. Uncertainties about the potential number of copies to be sold by the reseller may indicate that the amount of future returns cannot be reasonably estimated on delivery; examples of such factors include the newness of the product or marketing channel, competitive products, or dependence on the market potential of another product offered (or anticipated to be offered) by the reseller.
4. Distribution arrangements with resellers require the vendor to rebate or credit portion of the original fee if the vendor subsequently reduces its price for a product and the reseller still has rights with respect to the product (sometimes referred to as price protection).