A shifting software revenue recognition landscape: Insights on potential impacts of the proposed revenue recognition model on current US GAAP

September 2010
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A shifting software revenue recognition landscape: Insights on potential impacts of the proposed revenue recognition model on current US GAAP

At a glance

Here, PwC discusses how companies might begin to apply the proposed model to typical software transactions by highlighting the context of the transaction, giving a brief summary of the current US GAAP approach, and providing insights into how the issue would be addressed under the proposed model.

On June 24, 2010, the US FASB and the IASB jointly issued an exposure draft on revenue recognition. These potential changes, if adopted, would significantly alter the landscape for software accounting worldwide. The proposed revenue model depicted in the exposure draft eliminates the unique software rules currently used under US GAAP and instead focuses more on principles that will be applied to all types of revenue generating transactions, with limited exceptions.

Software companies must explore the implications of this exposure draft and its impact on their revenues. Here, PwC discusses how companies might begin to apply the proposed model to typical software transactions by highlighting the context of the transaction, giving a brief summary of the current US GAAP approach, and providing insights into how the issue would be addressed under the proposed model.