Using ranges for ESPs in EITF 08-1
Kurt Morrow (Marketing Coordinator, Proformative)
| Apr 18, 2011This question was asked by an attendee at a recent Proformative Rev Rec webinar:
What if 2 of the 3 elements of a contract fall out of an ESP (Estimated Selling Price) range so that you need to apply the relative percentage but the 3rd element is maintenance and has a stated renewal rate -- would you first allocate the value of the maintenance contract based on that renewal pricing and then the remaining value based on relative selling price?
Topics:
Answers
Company: Hein & Associates LLP
If the stated renewal rate equates either VSOE, TPE, or ESP (in that order), that price would be used in the relative selling price allocation, along with the estimated selling prices of the other two elements. It would not be correct to allocate to the maintanence contract first and then allocate to the remaining elements on a relative selling price basis. All elements must be considered in the relative selling price allocation.