Adding a module to existing multi-module system

Real Example - A customer with an existing software system, 2 existing modules, is adding a third module which has not been released yet and thus revenue cannot be recognized yet. Issue - How should deal be structured so that the existing, reliable revenue stream can be recognized and the new module's revenue is deferred? Resolution - This can be done as long as the new module is not intertwined into the functionality of the older system. For example, if the system fundamentally changes with the new module, such as upgrading from Windows 95 to Windows 2000, then the new module is not truly separate. However if the new module is like adding Excel to a system that has Word and Outlook, then revenue for the incumbent modules can continue to be recognized. Other indicators that the new module is separate from the current system and modules include:

1. If the new module's contract is separate and does not tie into the original deal.
2. If the new module's contract does not change the terms, or fee of the original deal.
3. If the module's sale is not linked to the renewal of the existing deal.
4. The customer is currently happy with their current system and paying their bills.
5. The customer would continue paying their bills should the new module's roll out be problematic.

Authorized users

Real example - Preliminary contract included language that authorized users (customer's potential customers) of a subscription service by inclusion of a list of "potential affiliates" that would be reviewed annually. Each affiliate would have their own license fee, but the total in this deal was based on a total number of affiliates multiplied by the license fee. Issue - by including a list of users, revenue would only be able to be recognized when all those users were 'live' on the system. Resolution - language was re-written to define contract based on the main client, thus recognizing revenue when that particular client was 'live' but also included that subsequent affiliates would be added by addendum or statement of work, and bound by the terms of this deal. In other words, each affiliate that was added would have the same terms (the contract would not have to be re-written each time, and revenue could be recognized for each affiliate as each went live.