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U.S. GAAP Codification Accounting Topics

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Principles of AccountingU.S. GAAP Financial Reporting Guide
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Section 6120: Multiple-element Revenue Arrangements

[U.S. GAAP Codification Topic]
605-25 Multiple-element arrangements

[U.S. GAAP before the Codification]
EITF Issue No. 08-1, Revenue Recognition with Multiple Deliverables
EITF No. 08-1 supersedes EITF No. 00-21
EITF Issue No. 00-21, Revenue Recognition with Multiple Deliverables

1. Multiple-Deliverable Revenue Arrangements (MDRA)
--> divided into separate units of accounting
--> if two conditions listed in ASC 605-25-25-5 are satisfied

EITF 00-21 had three conditions.
EITF 08-1 deleted one condition.

2. Arrangement consideration is allocated
--> based on the relative selling prices
--> "relative selling price method"

[Note] EITF 00-21 used the "relative fair value method"

3. Two conditions for a separate unit of accounting
(1) Delivered items have value to the customer
--> on a standalone basis
(2) Delivery of undelivered items is
--> considered probable and
--> under the substantial control of the vendor

EITF 00-21 had one more condition that was deleted by EITF 08-1
--> Undelivered items should have
--> the objective and reliable "evidence of fair value"

4. Relative selling price method
(1) Arrangement consideration is allocated
--> at the inception of the arrangement
--> based on their "relative selling prices"

(2) Selling price is determined using
--> the "Vendor Specific Objective Evidence" (VSOE) of selling price

5. If VSOE does not exist
--> use the "Third-Party Evidence" (TPE) of selling price

6. If both VSOE and TPE are not available
--> use the "best estimate" of selling price

7. Examples of EITF 08-1
(1) Cellular telephone contract
(2) Can manufacturing equipment
(3) Standard equipment installation
(4) Automobiles sold with lifetime maintenance services
(5) Sale of home appliances with installation and maintenance services
(6) Human resources outsourcing services
(7) Sale of medical equipment with cartridges and installation
(8) Sale of computer system
(9) Sale of 12 bolts of fabric
(10) Painting contract
(11) Agricultural equipment

Index of U.S. GAAP Financial Reporting Guide

U.S. GAAP by Codification Topics 
 105  GAAP Hierarchy 
 105  GAAP History 

 205  Presentation of Financial Statements 
 205-20 Discontinued Operations 
 210  Balance Sheet 
 210-20 Offsetting 
 220  Comprehensive Income 
 225  Income Statement 
 225-20 Extraordinary and Unusual Items 
 230  Statement of Cash Flows 
 250  Accounting Changes and Error Corrections 
 260  Earnings per Share 
 270  Interim Reporting
 310  Impairment of a Loan
 320  Investment Securities 
 320  Other-Than-Temporary Impairments, FSP FAS 115-2 
 320-10-05 Overview of Investments in Other Entities 
 320-10-35 Reclassification of Investments in Securities
 323-10 Equity Method Investments
 323-30 Investments in Partnerships and Joint Ventures 
 325-20 Cost Method Investments 
 330  Inventory

 340-20 Capitalized Advertising Costs 
 350-20 Goodwill 
 350-30 Intangibles Other than Goodwill 
 350-40 Internal-Use Software 
 350-50 Website Development Costs 
 360  Property, Plant and Equipment
 360-20 Real Estate Sales

 410  Asset Retirement and Environmental Obligations 
 420  Exit or Disposal Cost Obligations 
 450  Contingencies 
 450-20 Loss Contingencies 
 450-30 Gain Contingencies
 480  Redeemable Financial Instruments 

 505-20 Stock Dividends, Stock Splits 
 505-30 Treasury Stock 

 605  SEC Staff Accounting Bulletin, Topic 13 
 605-25 Revenue Recognition - Multiple Element Arrangements 
 715-30 Defined Benefit Plans - Pension
 718  Share-Based Payment 
 730  Research and Development 
 730-20 Research and Development Arrangements 

 805  Business Combinations  
 810  Consolidation 
 810  Noncontrolling Interests 
 810  Consolidation of Variable Interest Entities, SFAS 167 
 815  Derivatives and Hedging Overview 

 820  Fair Value Measurements  
 820  Fair value when the markets are not active, FSP FAS 157-4
 825  Fair Value Option 

 830  Foreign Currency Matters 
 830-20 Foreign Currency Transactions 
 830-30 Translation of Financial Statements 
 835  Interest 
 835-20 Capitalization of Interest 
 835-30 Imputation of Interest 

 840  Leases 
 840-20 Operating Leases 
 840-30 Capital Leases 
 840-40 Sale-Leaseback Transactions
 845  Nonmonetary Transactions 

 855  Subsequent Events 
 860-20 Sale of Financial Assets, SFAS 166 
 860-50 Servicing Assets and Liabilities, SFAS 156 

 985-20 Costs of software to be sold  

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