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Topic: Notable Opinions
There has been a great deal of discussion as to whether or not VCSY could be deferring reporting revenue. Now, the Vertical Computer Systems company filing under a new accounting system gives some specifics:
"Where VSOEFV (Vendor-Specific Objective Evidence of Fair Value) has not been established for certain undelivered elements, revenue for all elements is deferred until those elements have been delivered or their fair values have been determined."
In the dotcom era, software companies announced revenue on every item in a contract long before the item would be delivered and often long before an accurate value on the item could be determined. Times have changed and companies must now comply with a more stringent assessment of value for every component deliverable within a contract:
"SOP 97-2, which was later amended by SOP 98-9. These rules say that when software and other items are bundled together in a contract, a company cannot recognize any of the revenue from the contract until the last item has been delivered — unless it can prove the separate value of each item. For example, if a company sells a software license with installation services and 12 months of maintenance, it must either defer all that revenue for 12 months or recognize it proportionately over the 12 months, depending on the particular circumstances, unless it can establish the independent values of the undelivered items."
For background on VSOE (Vendor Specific Objective Evidence) and the difficulties software companies face in complying with the Federal rules:
Thanks to various posters on Raging Bull, the readers have example articles for some self-education and edification regarding intellectual property and the value determinations thereof.