Accounting for Bundled Services (multi-element arrangements for software companies)



This video shows how to recognize revenue for bundled services in a multi-element arrangement. This type of transaction frequently occurs for technology firms that sell a variety of services (e.g., software, tech support, training) as a package deal. The fair value of each element (e.g., the tech support) must be estimated so that the firm can calculate the proportion of the total package revenue that is attributable to each element. The revenue associated with a given element is recognized after the firm performs its obligations related to that element (e.g., the firm recognizes the revenue from the software component of the package after it installs the software for the client).—
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