What is Vendor Specific Objective Evidence?
VSOE, or Vendor Specific Objective Evidence, is Fair Value for Software. The concept was introduced in 1997 by the AICPA in their Statement of Position (SOP) 97-2: It governs how any company that licenses, sells, leases or otherwise markets software (unless it’s incidental to the product or service as a whole) must recognize the revenue. In particular, it governs how companies must recognize revenue from so-called “multiple-element arrangements” – bundles of software and related products or services sold as a unit at a single price. Today, more and more companies find themselves dealing with VSOE as embedded software becomes an increasingly essential element in traditionally non-software sectors – consider cell phones, medical devices, computer networks, even cars with GPS services, etc. According to SOP 97-2: you allocate relatively, splitting the fee amongst the products and related elements based upon VSOE – which is the price established by the vendor for the separate sale of each
