ASC 605-25, establishes the accounting and reporting guidance for revenue recognition of multiple-element arrangements, under which the entity will perform multiple revenue-generating activities. Specifically, it addresses how to separate deliverables and how to measure and allocate consideration to one or more units of accounting. An entity may enter into arrangements that include various components, or elements, that do not fall under the scope of one specific piece of accounting guidance. A single arrangement, for example, may include software, hardware, and service elements. Evaluating the individual elements in such arrangements often requires judgment and is essential in determining the appropriate accounting model to apply. In addition, an entity must identify and evaluate the impact of all contract provisions, such as sales incentives, rights of return, contingent revenue, when-and-if-available deliverables, and other terms, each with the potential to affect the timing and/or amount of revenue to be recognized.
Oracle Capital has the depth of Big Four accounting experience necessary to help management determine these units of account and determine the value of the consideration required to be allocated to each.