New Multiple-Deliverable Revenue Arrangements Guidance

(Ernst & Young) Technical Line Bulletin       

This bulletin looks at the effects of the new Multiple-Deliverable Revenue Arrangements guidance on cloud computing vendors. Over the past several years, the growing number of vendors providing cloud computing services has led to an increased awareness of the complexities inherent in accounting for the revenue associated with these transactions. However, unlike many software-related arrangements, no specific authoritative literature exists for such arrangements. These arrangements generally fall within the scope of the multiple-element arrangements guidance in ASC 605-25 and the general revenue recognition guidance of SEC Staff Accounting Bulletin Topic 13.

The guidance for multiple-element arrangements was recently modified by the final consensus on EITF 08-1, "Revenue Arrangement with Multiple Deliverables," that was codified by ASU 2009-13, Multiple-Deliverable Revenue Arrangements. The resulting changes could have a significant effect on the revenue recognition practices of cloud computing vendors.

This Technical Line provides an overview of the amendments in ASU 2009-13 and describes how these amendments may affect cloud computing arrangements. Additionally, it includes example cloud computing arrangements and provides considerations in applying the revised guidance to the example arrangements.

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For further enquiries contact Lucy McCabe (Director, Export Control and International Trade Advisory) at Ernst & Young LLP lmccabe@uk.ey.com