In October 2009, the FASB issued new guidance for arrangements with multiple deliverables under which a company is required to use its best estimate of selling price for the deliverables in an arrangement when vendor specific objective evidence or third party evidence of the selling price is not available. The residual method of allocating arrangement consideration will no longer be permitted. Under the new guidance, non-software components of tangible products and certain software components of tangible products have been removed from the scope of existing software revenue recognition guidance. Revenue for those products will be recognized in a manner similar to revenue for other tangible products.
The updated guidance, including the requirement for expanded qualitative and quantitative disclosures, is effective for fiscal years beginning on or after June 15, 2010 (January 1, 2011 for calendar year-end companies). Companies may early adopt in interim or annual periods for which financial statements have not been issued. The guidance may be applied either prospectively from the beginning of the fiscal year for new or materially modified arrangements or retrospectively.
In Dataline 2009-54, we provided our analysis and insights on the new guidance. In this new Dataline, we've updated and expanded on the discussion in Dataline 2009-54 to incorporate additional insight and implementation considerations based on our experience with companies that have early adopted the new guidance.
* Question 24 was revised to reflect updated guidance on applying ASU 2009-13 to multiple-element litigation settlements.