Instructor for this course
more

With the updated revenue recognitions standards, recognition for software and technology is expected to continue to present challenges for financial statement (FS) preparers. Ways of doing business continue to evolve as do the views of the standard setters and regulators.  It is imperative that any company required to apply the software revenue recognition standards be thoroughly knowledgeable of the guidance.

In May 2014, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) issued largely converged revenue recognition standards.  This new guidance replaces virtually all current revenue recognition guidance, including software revenue recognition guidance in Accounting Standards Codification (ASC) Subtopic 985-605, Software—Revenue Recognition. The accounting change will be especially notable for software/technology companies and may require modification to systems, processes, controls and documentation to meet the new requirements.

Most companies in the software industry will be significantly affected. The level of modification to current revenue recognition practices will depend on the nature of the company’s revenues. 

Those companies with software license revenue will be most affected.  There will be a lesser impact on the recognition of software-as-a-service (SaaS) revenue.

Software companies’ arrangements with customers often include multiple components wrapped into one contract. These could include:

  • Software licenses
  • Software-as-Services (SaaS)
  • Post-contract customer support (PCS) 
  • Other goods or services. 

The new guidance changes how software entities are recognizing revenue for these contracts in a few notable ways.

Accounting Standards Codification (ASC) Topic 606, Revenue From Contracts With Customers, provides a more defined structure for assessing all revenue transactions and consists of five elements:

  • Identify the contract with a customer
  • Identify the performance obligations (promises) in the contract
  • Determine the transaction price
  • Allocate the transaction price to the performance obligations
  • Recognize the revenue when (or as) the reporting organization satisfies the performance obligations

This course is part one in a two segment series that deals with Revenue Recognition for Software and Technology companies.  It is designed to provide insight related to the new revenue recognition standard as it applies to software and technology processes.

Resources Consulted:
• ASC 606-10-32-15 to 32-20, 55-244 to 55-246.
• ASU 2014-09: “Revenue from Contracts with Customers.” BC229-BC247.
• Croner-I, “A14 Revenue from Contracts with Customers.” (2019). Section 7.4.2-2 and 7.4.2-2.
• FASB, ”Revenue Recognition Implementation Q&As.” January 2020). Questions 31-37.
• FASB TRG Memo 20: “Significant Financing Components.” 26 January 2015.
• FASB TRG Memo 30: “Significant Financing Components.” 30 March 2015.
• EY, Financial Reporting Developments: “Revenue from contracts with customers.”January 2020. Section 5.5.
• KPMG, Handbook: “Revenue Recognition.”December 2019. Section 5.5.
• PWC, “Revenue from contracts with customers”March 2020. Section 4.4.
https://www.revenuehub.org/

Learning Objectives

  • Explore changes to the revenue recognition process for software and technology and companies that deal in this industry.
  • Explore the basic principles of revenue recognition for software and technology and companies that deal in this industry.
  • Examine the five step process of revenue recognition using software and technology as an example.
  • Explore practices involving revenue recognition and accounting for costs of computer software. 
Last updated/reviewed: May 15, 2022

74 Reviews (354 ratings)Reviews

5
Anonymous Author
Watched this course after watching Lynn's other ASC 606 overview video. Recommend both but this expanded on some of the changes in the SW industry related to the new standard. A bit more complicated, but a good overview none-the-less
5
Anonymous Author
It was a great course to take after taking the Revenue Recognition overview course. Although still many details to follow, it made the process a bit easier to follow after the understanding of the 5 steps process overview.
5
Anonymous Author
Good overall presentation of the revenue recognition challenges faced by software vendors. I'd recommend to anyone interested in the topic. I wish there would have been a slide or two on SaaS, maybe in part 2.
1
Anonymous Author
Was very hard to follow and not very engaging. I would like it better if this course was made more engaging and broken down to be simpler to understand, rather than trying to cover too much on one slide.
5
Anonymous Author
Very good overview of revenue recognition components as it relates to technology and software. Also, gives a good overview of the old revenue recognition standard and compare it to the new guidance.
5
Anonymous Author
Great concise course over revenue recognition for software and technology. Great information for IT Audit level staff on how the new acquisition of technologies affects the Financial Audit aspects.
4
Anonymous Author
The presentation was great but I'm wondering why some of the final exam questions were specific to ASC 605 (and not just what has changed from it) when that guidance has been superseded.
5
Member's Profile
Lynn's courses are spot on and are presented in an organized and straight forward manner. This course is no different. A good overview for software and technology as it relates to 606.
5
Anonymous Author
Great course, very thorough despite being a niche interest. Incredibly relevant for anyone working in the software/tech space and charged with the technical accounting responsibilities.
4
Anonymous Author
Good overview of revenue recognition for software and technology, but I think this course is too general for me. I wish to have a series of in-depth courses for software industry.
5
Member's Profile
Useful course, however, too many repeats from the other general 606 sessions. I was hoping this course would be more specific and would use some examples. I bit too general for me.
5
Anonymous Author
This is a great course to learn about Topic 606 as it impacts Software and Technology companies. Need to take the entire Revenue Recognition courses prior to taking this course.
4
Anonymous Author
This is a very good course on the Revenue Recognition standard specific to Software. Full of key concepts and cosiderations, this is a good intro course or a refresher.
5
Anonymous Author
Thank you for going so in depth in the new software revenue recognition criteria. This is something I know nothing about and found it really interesting to learn about.
5
Member's Profile
This course thoroughly explained the new standards for Revenue Recognition for software. Learning about the Variable Consideration element was most valuable to me.
5
Member's Profile
Excellent discussion of specifics related to software and technology revenue recognition. A complicated topic explained and presented in a digestible manor.
5
Anonymous Author
This is a good run down of revenue recognition rules and what has changed. I like that it focused on software & tech as that's extremely pertinent to me.
5
Anonymous Author
Great follow up course to ASC 606 Review recognition overview course. Good overview of new revenue recognition as it relates to technology and software.
5
Anonymous Author
The instructor provides plenty of insights on how to account for revenues using ASC 606 in a software/technology company in a clear and concise manner.
4
Anonymous Author
I thought this course provided a good overview of the new guidance when compared to the old. It would be nice to have more examples to walk through.
3
Anonymous Author
course not specific enough. may be a better approach would be to take an example and work through the issues resulting in journal entry examples
4
Member's Profile
Excellent overview, quite detailed. To enhance content it may be helpful to provide more examples of the process in real business activity.
5
Member's Profile
This is a great review of ASC 606. Very helpful refresher of the contract elements and a deeper understanding of software and technology.
5
Anonymous Author
The topics in this course were presented well. This was a good overview of how Topic 606 applies to computer software companies.
4
Member's Profile
This is a good class as an overview, but continual reference to other classes was a distraction. Good presenter and good slides
5
Member's Profile
Course was great, enjoyed the detailed dive into ASC 606 implications specifically scoped to SAAS industry + relevant products.
5
Anonymous Author
I enjoyed the content in this course. I thought the information was valuable for someone working in the software industry.
5
Anonymous Author
Excellent presentation of the changes in revenue recognition standards for software sales. Easy to follow and informative.
4
Anonymous Author
Having taken few accounting-based courses in my undergrad, this was a thorough and succinct course that taught me a lot.
5
Anonymous Author
This course was very helpful as I work in the software industry and wanted to brush up on the revenue guidance. Thanks!
5
Anonymous Author
Very thorough and applicable to SaaS companies and the unique challenges they face when it comes to revenue recognition
5
Member's Profile
This module is part of a series on ASC606 That all accounting professionals should complete. Excellent presentation.
4
Member's Profile
Just looking at slides is not as lively as when the instructor's face was displayed simultaneously with the slide.
5
Anonymous Author
Good overview of the new revenue rules compared to the older rules. Helps to create more accurate revenue reporting.
4
Anonymous Author
Detailed overview. Would be nice if there was more interactive exercises rather than just reading from a slide deck
5
Anonymous Author
Lynn Fountain's courses are always thorough and easy to follow. The courses are detailed with excellent examples.
4
Anonymous Author
There's a big difference between "Pervasive (on handout)" vs persuasive (ASC wording). Please adjust accordingly
5
Anonymous Author
A very interesting explanation of how the new revenue recognition standards will affect the Software industry.
5
Anonymous Author
Explained very well and easy to understand. It's a complicated subject, but Lynn makes it much easier to get.
4
Member's Profile
Great overview and of revenue recognition and the implications to software contracts/licenses. Thank you!
5
Anonymous Author
Great high level summary and comparisons between ASC 606 and ASC 606 for software revenue recognition.
3
Anonymous Author
Some parts of the course were very theoretical. There was not enough time spent on concrete examples.
5
Member's Profile
Very good intro to an extensive and nuanced standard that takes a while to wrap your arms around.
3
Member's Profile
The course is good as it takes you through the concept of revenue recognition under new principles.
4
Member's Profile
This topic is especially relevant for financial professionals in the Saas and software industries.
5
Member's Profile
Great overview of ASC 606 - I look forward to digging into the more detailed sub-topic learnings.
5
Member's Profile
It was great experience to understand Topic 606 Revenue Recognition for Software and Technology.
5
Anonymous Author
Very helpful deep dive into the impact on the software industry for the revenue rule changes.
5
Member's Profile
Good content. Covered the main topics. Can be updated now the standard is already in place.
4
Anonymous Author
This an extremely comprehensive course. take this course if you work with software and tech!
3
Anonymous Author
wow once again you have done it illumeo, some of the best content out there on the marker
5
Anonymous Author
This topic can get messy and this presentation lays it out concisely with good examples.
5
Member's Profile
This was a tough course! But I learned a lot and I'm grateful that I took it. Good job!
4
Anonymous Author
Overall good overview of the concepts related to software of the new rev rec standards.
5
Anonymous Author
Great course and easy to follow. The slides were very thorough and a good resource.
5
Anonymous Author
excellent course. I am very satisfied with the info. Thanks Lynn. You're the best.
4
Anonymous Author
Good overview of rev rec; has pdf files for reference with material of the course
5
Anonymous Author
Nice course. Source materials are laid out well and meet the course objectives.
5
Anonymous Author
Good basic overview, a little repetitive of concepts taught in other courses.
5
Member's Profile
This was great! I appreciate how the course was very clear and easy to follow.
5
Anonymous Author
This was an interesting course and a helpful review. The slides were useful.
4
Member's Profile
Revenue recognition is an important topic and has been adequately explained.
5
Anonymous Author
Great course for those of us that deal with software revenue recognition.
5
Member's Profile
Thank you so much for laying out complex topics as simply as possible!
5
Anonymous Author
Great overview of how ASC 606 impacts software and technology revenue
5
Anonymous Author
Course is well developed and presented. Good review or intro course.
5
Anonymous Author
This course was very helpful. Well presented and easy to follow.
4
Anonymous Author
The discussion between VSOE and SSP was not detailed enough.
5
Anonymous Author
good course for software industry specific revenue issues.
5
Member's Profile
Thank you very much for this guide into a new area for me.
5
Member's Profile
Nice comparison between 605 and 606 criteria and outcomes
4
Member's Profile
Very helpful in breaking down changes to new guidance.
4
Anonymous Author
Good course overall. maybe too much on asc 605 though?
5
Anonymous Author
Very informative course exam questions are a bit vague

Prerequisites

Course Complexity: Advanced

No advanced preparation or prerequisites are required for this course.

Education Provider Information

Company:
Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact:
For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Course Syllabus
INTRODUCTION AND OVERVIEW
  6:15Introduction to Topic 606 - Topic 606: Revenue Recognition for Software and Technology
  17:19Overview of Changes
  10:05Five Step Process
  14:32Performance Obligations
  14:50Transaction Price
  12:36Basic Principles of RR
  2:24Summary
CONTINUOUS PLAY
  1:18:01Topic 606: Revenue Recognition for Software and Technology Full Video
SUPPORTING MATERIAL
  PDFSlides: Topic 606: Part 1: Revenue Recognition for Software and Technology
  PDFAppendix - Guidance on whether a license to IP represents a right to access or right to use
  PDFTopic 606: Part 1: Revenue Recognition for Software and Technology Glossary/Index
REVIEW AND TEST
  quizREVIEW QUESTIONS
 examFINAL EXAM