SOP 97-2 Background

91-1 - issued in 1991 to provide guidance on applying generally accepted accounting principals to software transactions and to narrow the range of revenue recognition practices that were in use before.

• Evidence of an arrangement
• Fixed or determinable fees
• Not great with accounting for multiple element arrangements
• Not great with delayed payment terms
• Not great with vendor obligations

97-2 - replaced 91-1

• Specifies revenue recognition for all entities earning revenue from marketing software.

98-4 delayed effective date for VSOE aspect of 97-2 98-9 revision of 98-4

Terminations

When a customer terminates their contract, revenue may be recognized if the customer is the one opting out, requesting to terminate and no longer using the system (all in writing). However if the customer is requesting a termination to a contract so that it is not automatically renewed, revenue should be taken over the remaining term.