Revenue Arrangements with Multiple Deliverables
Revised Guidance Better Reflects Economic Substance
By Nick Steiner and Dave Kintz
- FASB recently issued EITF Issue Number 08-1, which modifies the way companies with multiple deliverable arrangements will report revenue. The most significant change is the introduction of Relative Selling Price which replaces the old requirement to establish objective evidence of fair value.
- FASB also issued EITF Number 09-3, which modifies revenue recognition guidance for tangible products sold along with essential software. This guidance eliminates the confusion that previously existed over how to account for these specific arrangements.
- The above changes in the rules surrounded revenue recognition will lead to an increased level of review and could possibly lead to quicker revenue recognition that better follow the economic substance over these types of arrangements.