Lack of VSOE

If sufficient vendor specific objective evidence does not exist for the allocation of revenue to the various elements of the arrangement, all revenue from the arrangement should be deferred until the earlier of the point at which (a) such sufficient vendor-specific objective evidence does exist or (b) all elements of the arrangement have been delivered. Exceptions:

• If the only undelivered element is PCS<>
• If the only undelivered element is services that do not involve significant production, modification or customization of software (for example, training or installation), the entire fee should be recognized over the period during which the services are expected to be performed.
• If the arrangement is in substance a subscription, the entire fee should be recognized ratably.
• There may be instances in which there is VSOE of the fair value of all undelivered elements in an arrangement but VSOE of fair value does not exist for one or more of the delivered elements in the arrangement. Ins uch instances, the fee should be recognized using the residual method, provdied that (a) all other appplicable revenue recognition criteria in this SOP are met and (b) the fair value of all the undelivered elements is less than the arrangement fee. Under the residual method, the arrangement fee is recognized as follows: (a) total fair value of the undelivered elements, as indicated by VSOE, is deferred and (b) the difference between the total arrangement fee and the amount deferred for the undelivered elements is recognized as revenue related to delivered elements.