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EITF 08-1: Not relevant to pure licensed software companies?

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The following was a question posed by a CFO during a recent Revenue Recognition webinar:

EITF 08-1 is only applicable to companies delivering hardware and software, or equipment containing software, but not a software only company - correct ?

The webinar speakers will offer their thoughts, but please feel free to comment and share your perspective as well.


David Elsbree
Title: Partner
Company: KPMG
(Partner, KPMG) |

Correct. Software arrangements that do not contain hardware are within the scope of ASC Subtopic 985-605 (SOP 97-2), rather than ASC Subtopic 605-25 (EITF 08-1).

Konrad Sosnow
Title: Revenue Recognition Guru
Company: Konrad M. Sosnow & Associates
(Revenue Recognition Guru, Konrad M. Sosnow & Associates) |

Saas software companies, such as and NetSuite, fall under ASC 605-25 (EITF 08-1)NOT ASC Subtopic 985-605 (SOP 97-2).

David Elsbree
Title: Partner
Company: KPMG
(Partner, KPMG) |

Thank you for helping to clarify. I don't know the specifics of or NetSuite, so I cannot comment on their particular facts.

An entity would need to consider the relevant scoping guidance in ASC Section 985-605-15 to determine whether an arrangement is in the scope of the software revenue recognition guidance. For example, a company may consider itself a "software company" but it delivers a service whereby the customer never takes possession of the software. Those types of arrangements would be within the scope of ASC Subtopic 605-25 (EITF 08-1), not ASC Subtopic 985-605 (SOP 97-2).

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