Recognized Revenue Software licenses

Canada Discussion in 'General Accountancy Discussion' started by Sam Recon, Jun 9, 2018.

  1. Sam Recon

    Sam Recon

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    Hi there

    I have a question regarding recognized revenue:

    Context:
    1. Customer signs a contract for 5 years
    2. They don’t have enough money to purchase 1000 licenses software value of ~1M in year 1, so they split the software value to ~500k for year 1 and ~500k for year 2
    3. The customer fiscal year starts Oct 1st, The vendor fiscal starts Jan 1st
    4. Year 1 customer = Oct 1st 2016 to September 30 2017
    5. Year 1 vendor = Jan 1 2017 to Dec 31 2017
    5. Vendor cannot decouple the 1000 enterprise licenses, so everything was installed on the cloud server by vendor on July 2017
    6. Vendor was expecting PO #2 for ~500k of licenses + ~200k of other items around Oct 2017
    7. The PO #2 for customer fiscal year 2 is for about ~700k and only came on Jan 2018
    8. We finished the ~200k work around april-may 2018, and invoiced the complete 700k around may/june 2018.
    9. the 500k licenses and the 200k services and hardware had no direct impact for implementation and operations of the 1000 licenses installed on July 2017;

    Question:
    1. Since the 1000 licenses were installed on July 2017, should the 500k revenue part of PO #2 which was submitted on Jan 2018 be recognized for vendor in fiscal 2017?


    Thanks
    Sam
     
    Sam Recon, Jun 9, 2018
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  2. Sam Recon

    Sam Recon

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    Any questions on this message? I would love to hear how many believe that the recognized revenue should be in 2017 or 2018.

    Thanks
    Sam
     
    Sam Recon, Jun 12, 2018
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  3. Sam Recon

    Steve-LevelUp VIP Member

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    I would say 2017
     
    Steve-LevelUp, Jun 14, 2018
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  4. Sam Recon

    Victor Shah

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    I would say 2017 when the software was installed. the payment clause of 500k for 2 years is a payment terms, that has nothing to do with the revenue recognition.
     
    Victor Shah, Jun 26, 2018
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