Why is Revenue Recognition important for ISVs?
ISVs often encounter complex customer arrangements involving software licensing, maintenance and services costs which might vary according to various reasons across customer segments per year. Complex accounting rules governing the recognition of revenues for Software products and services complicate the revenue cycle. Revenue for ISV’s is typically divided into three categories: Software, Maintenance, and Services. Assuming that software customization is not required, revenue can be recognized when all of the following criteria are met: • Evidence of an arrangement (SLA and/or PO) • Delivery has occurred ( Physical Delivery/Electronic Delivery) • Fixed and determinable fee • Collectibility is probable For ISVs, one area of revenue management commonly encountered in the early stages of the continuum is establishing Vendor Specific Objective Evidence (VSOE) of fair values. But it can be very difficult to determine how fair values have been determined. Based on VSOE for their products or
