more-arw search

Q&A Forum

The Purpose of ESPs (Estimated Selling Prices under EITF 08-1)

Member's Profile
The following was a question posed by a Controller during a recent Revenue Recognition webinar:
 
I have a conceptual question. I'm not sure I understand the purpose of the ESP's. In the example given in the webinar by Mini, if the subscription is sold at $2,000, then why would you recognize that revenue at anything other than $2,000?
The webinar speakers will offer their thoughts, but please feel free to comment and share your perspective as well.

Answers

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

The contract prices for the elements in a Multi-element Arrangement are not considered to be the value of the deliverables. Frequently the contract prices are negotiated between sales and the customer. The total arrangement price is looked at carefully, but not the prices of the individual deliverables.Thus, VSOE was required to establish the value of the deliverables. Under EITF 08-1 there is a three tier method of determining the value of the deliverables: First is VSOE; Second, if you cannot establish VSOE use Third Party Evidence; Third, if you do not have Third Party Evidence, use Estimated Selling Price.

1903 views
Topics

Get Free Membership

By signing up, you will receive emails from Proformative regarding Proformative programs, events, community news and activity. You can withdraw your consent at any time. Contact Us.

Business Exchange

Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business.

Learn more

Contribute to Community

If you’re interested in learning more about contributing to your Proformative community, we have many ways for you to get involved. Please email content@proformative.com to learn more about becoming a speaker or contributing to the blogs/Q&A Forum.