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How do you treat EITF 08-1 revenue recognition on unrelated items in the same sales order?

This question was asked by an attendee at a recent Proformative Rev Rec webinar: Would EITF 08-01 cover arrangements with customers that included both strategic services that have a stand alone value not associated with any software sold to the customer PLUS software that may also be sold to the customer within the same transaction?


Topic Expert
Bob Scarborough
Title: CEO
Company: Tensoft, Inc.
(CEO, Tensoft, Inc.) |

I think that the answer to this question is the arrangement appears to fall under software revenue recognition (SOP 97-2) and not EITF 08-1 because it has software and does not have a tangible product element. This would appear to be a multiple element software transaction.

There could also be an impact by SOP 98.1 that discusses delivery / services impact on software revenue recognition - although the statement in the question says they are services not related to the software acceptance.

Credit to revenue recognition expert Jeffrey Werner for this response.

Topic Expert
Jim Brendel
Title: Partner
Company: Hein & Associates LLP
(Partner, Hein & Associates LLP) |

I think I would look first to SOP 97-2 and whether the services would be considered a "software related item". If they are, I agree that this would be considered a multiple element software transaction. However, your question indicates that the services have standalone value not associated with the software. That would indicate that those services may not be a software related item. In that case, I do think it would be appropriate to first segregate the services under EITF 08-1. The software sale would be governed by SOP 97-2.


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