Businesses may perform services that offer more than one deliverable. As such, there are several options for identifying and managing revenues, which in this case, means that there are several important evaluations to undergo. Determining the types of applicable units of accounting and estimated prices are the first steps and here are some tips to follow.
As discussed in “Debrief on ASU 2009-13 (EITF 08-1): Revenue Arrangements with Multiple Deliverables,” posted on RevenueRecognition.com, the most recent update to this accounting practice includes replacing ‘Fair Value’ with ‘Selling Prices’ and also eliminating the evidence for fair value, which is often difficult to determine for undelivered items. Now, vendors must evaluate each deliverable to determine whether it can be treated with a separate unit of accounting or combined with other deliverables in an ‘aggregated group’, which is then treated as a single accounting unit. Evidence for selling process must be tiered using vendor specific objective evidence (VSOE), third party evidence (TPE), and if neither of these exist, then estimated selling prices (ESP) can be used. Managing these variables requires additional work, skilled judgement and the support of a strong financial management solution. Contact BTerrell Group to learn how Intacct can support these complicated revenue recognition methods with efficiency and accuracy today while getting you ready for the game changing guidance of the future in ASC 606 – Revenue from Contracts With Customers.