2 CPE 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 (ASC Topic 606) For Computer And Software 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: March 6, 2024
95 Reviews (444 ratings)
Reviews
Anonymous
(Owner & CEO)
Good overview of the effects of the new revenue standard. However, the information relating to the old revenue standard, although interesting, is no longer applicable to either public or nonpublic entities so I would recommend updating the course to address more scenarios relating to the new standard and to eliminate the information relating to the old standard.
Anonymous
(Managing Director of Technical Accountin..)
Good as a revisit to basic principles of ASC 606. I think given the topic, I didn't think we needed to revisit the prior existing guidance as much as was done here. I think most of our people get hung up on Steps 2 and 4, consider more time on those aspects.
Millie Simpson
(Accountant at Self Employed)
The outline and progression of the course was organized and helped to give a good summary of the subject. The initial outline included Segment 2, but this is not covered in this course. There is also no link or reference of where Segment 2 can be found.
Anonymous
()
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
Anonymous
(Snr Accounting Consultant, CPA)
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.
Anonymous
(VP of Accounting)
Good job with
Explore changes to RR for software
and technology.
• Explore the basic principles of RR for
software/technology.
• Explore practices involving RR and
accounting for costs of computer
software.
Anonymous
(CFO)
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.
Anonymous
(Financial Analyst)
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.
Anonymous
()
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.
Anonymous
(IT Risk Associate)
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.
Anonymous
(Revenue Lead)
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.
Neal Stiles
(Accounting & Finance Guy at Contractor)
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.
Anonymous
()
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.
Anonymous
(None)
Solid overview of the changes. In particular, I liked how this addressed industry specific areas but in a clear manner (less jargony) than others I have seen. Helpful as a refresher.
Anonymous
(Assistant Controller)
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.
Inna Shmukler
(Controller at Fornetix LLC)
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.
Anonymous
(Revenue Accounting Manager)
Really like the slides and files but the examples are repetitive. Wish to have more current scenario examples if possible. But the instructor is very engaging for sure. Thank you.
Anonymous
(Director of Accounting)
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.
Anonymous
(-)
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.
Anonymous
(Accountant)
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.
Sharon King
(Contractor at Self employed)
This course thoroughly explained the new standards for Revenue Recognition for software. Learning about the Variable Consideration element was most valuable to me.
GREG HALL
(Adjunct Professor at University of Iowa)
Excellent discussion of specifics related to software and technology revenue recognition. A complicated topic explained and presented in a digestible manor.
Anonymous
()
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.
Anonymous
()
Great follow up course to ASC 606 Review recognition overview course. Good overview of new revenue recognition as it relates to technology and software.
Anonymous
()
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.
Anonymous
(Director)
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.
Anonymous
(CPA)
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
Guan-Ru Lai
( at not available)
I explored the basic principles of RR for software/technology and explored practices involving RR and
accounting for costs of computer software.
Joe Isaacs
(Unemployed at N/A)
Ms. Fountain was an effective speaker. She was clear with a strong grasp of the material. She also has the ability to explain complicated items.
Anonymous
()
I would only ask for more practical examples, please. like let's do a page with debits and credits to better understand some of these concepts
John Sullivan
(Controller at Sophos, Inc)
Excellent overview, quite detailed. To enhance content it may be helpful to provide more examples of the process in real business activity.
Parker Forge
(Financial Analyst at Stryker)
This is a great review of ASC 606. Very helpful refresher of the contract elements and a deeper understanding of software and technology.
Anonymous
(cpa)
Taking this segment for the sake of completeness of ASC-606 related courses from this instructor. Onto Part-2 now. Thank you Ms Fountain!
Anonymous
(Accounting Manager)
Good course, pretty basic, but reinforced the concepts. I need to take the other courses in the series to feel more knowledge able.
Anonymous
(Controller)
The topics in this course were presented well. This was a good overview of how Topic 606 applies to computer software companies.
Sandra Heelan
(CPA, CFE, MBA at None)
This is a good class as an overview, but continual reference to other classes was a distraction. Good presenter and good slides
Ryan Yee
( at Airbnb)
Course was great, enjoyed the detailed dive into ASC 606 implications specifically scoped to SAAS industry + relevant products.
Anonymous
(Senior Revenue Manager)
I enjoyed the content in this course. I thought the information was valuable for someone working in the software industry.
Anonymous
(Controller)
Excellent presentation of the changes in revenue recognition standards for software sales. Easy to follow and informative.
Anonymous
(Financial Analyst)
Having taken few accounting-based courses in my undergrad, this was a thorough and succinct course that taught me a lot.
Anonymous
()
This course was very helpful as I work in the software industry and wanted to brush up on the revenue guidance. Thanks!
Anonymous
(Accounting Manager)
Very thorough and applicable to SaaS companies and the unique challenges they face when it comes to revenue recognition
Bryan Chamberlain
(Controller at N/A)
This module is part of a series on ASC606 That all accounting professionals should complete. Excellent presentation.
Ron Villarreal
( at Ron Villarreal CPA)
Just looking at slides is not as lively as when the instructor's face was displayed simultaneously with the slide.
Anonymous
(CFO)
Good overview of the new revenue rules compared to the older rules. Helps to create more accurate revenue reporting.
Anonymous
(Analyst)
Detailed overview. Would be nice if there was more interactive exercises rather than just reading from a slide deck
Anonymous
(Revenue Accountant)
Lynn Fountain's courses are always thorough and easy to follow. The courses are detailed with excellent examples.
Anonymous
(Consultant)
There's a big difference between "Pervasive (on handout)" vs persuasive (ASC wording). Please adjust accordingly
Anonymous
()
Good overview, but I would have liked to see more examples and hypothetical scenarios to illustrate the concepts.
Anonymous
(Accounting Manager)
A very interesting explanation of how the new revenue recognition standards will affect the Software industry.
Anonymous
(CFO)
Explained very well and easy to understand. It's a complicated subject, but Lynn makes it much easier to get.
Sophia Kasozi
(- at City of Edmonton)
Great overview and of revenue recognition and the implications to software contracts/licenses.
Thank you!
Laurie Green
( at Numbers In Action LLC)
I hope that part 2 has more examples with amounts & terms that the instructor explains during the course.
Anonymous
(Executive Director, Corporate Controller)
Great high level summary and comparisons between ASC 606 and ASC 606 for software revenue recognition.
Rebecca Russ
(Consultant at Bridgepoint Consulting)
I printed the slides. The last slide made me think that the course continued and I was missing slides.
Anonymous
()
Some parts of the course were very theoretical. There was not enough time spent on concrete examples.
Daniel Bryant
(Senior Financial Analyst at Google)
Very good intro to an extensive and nuanced standard that takes a while to wrap your arms around.
Abhiraj Gupta
(Financial Analyst at Osf Digital)
The course is good as it takes you through the concept of revenue recognition under new principles.
Elizabeth Sahnas
(Finance Director at Workable)
This topic is especially relevant for financial professionals in the Saas and software industries.
Andrew DeLorme
( at Allscripts)
Great overview of ASC 606 - I look forward to digging into the more detailed sub-topic learnings.
Nobuo Nurimoto
(General Accounting, Manager at Takeda Pharmaceutical Company Limited)
It was great experience to understand Topic 606 Revenue Recognition for Software and Technology.
Anonymous
(Accountant)
Very helpful deep dive into the impact on the software industry for the revenue rule changes.
Anonymous
(-)
This an extremely comprehensive course. take this course if you work with software and tech!
Vinicius Bravo Ferreira
(Senior Manager at World Fuel Services)
Good content. Covered the main topics. Can be updated now the standard is already in place.
Anonymous
(Staff Accountant)
Good course on the concept of 606 revenue recognition as they relate to software contracts.
Anonymous
(Financial Analyst)
wow once again you have done it illumeo, some of the best content out there on the marker
Anonymous
(Consultant)
This topic can get messy and this presentation lays it out concisely with good examples.
DAVID EDWARDS
(Sr. Accountant at Calpine)
This was a tough course! But I learned a lot and I'm grateful that I took it. Good job!
Anonymous
()
Overall good overview of the concepts related to software of the new rev rec standards.
Anonymous
(Chief Financial Officer)
Great course and easy to follow. The slides were very thorough and a good resource.
Anonymous
(Accountant)
As an accountant for a software company this course was very relevant to my job.
Anonymous
()
excellent course. I am very satisfied with the info. Thanks Lynn. You're the best.
Anonymous
(Maps and Chrome Controllership)
Good overview of rev rec; has pdf files for reference with material of the course
Ahmed Alzahid
(Controller at Company)
Great overview and gateway. Would also appreciate having more real life examples.
Anonymous
(Associate)
Nice course. Source materials are laid out well and meet the course objectives.
Anonymous
(Senior Revenue Accountant)
Great course overview as an accountant who works primarily with SaaS products.
Yemisi Akintola-Harrison
(Accountant at Google)
This was great! I appreciate how the course was very clear and easy to follow.
Anonymous
(CFO)
Good basic overview, a little repetitive of concepts taught in other courses.
Anonymous
()
This was an interesting course and a helpful review. The slides were useful.
Syed Kazmi
(Controller at Encompass Capital Advisors LLC)
Revenue recognition is an important topic and has been adequately explained.
Anonymous
(VP Finance)
The provided examples were great and helpful in understanding the material
Anonymous
()
Great course for those of us that deal with software revenue recognition.
Maya Walker
(Global Controller at Fourth Enterprises)
Thank you so much for laying out complex topics as simply as possible!
Anonymous
(Sr Financial Reporting Analyst)
Great overview of how ASC 606 impacts software and technology revenue
Anonymous
()
Course is well developed and presented. Good review or intro course.
Anonymous
(Sr. Accounting Manager)
This course was very helpful. Well presented and easy to follow.
Anonymous
()
I work for a SaaS company and I found this course very helpful.
Anonymous
(Lead Senior Accountant)
The discussion between VSOE and SSP was not detailed enough.
Anonymous
(Manger of technical accounting)
good course for software industry specific revenue issues.
Benjamin Benson
(Director of strategy at Agilysys)
This was a very good course and a helpful primer on rev rec
Robert Godfrey
(CPA at Robert Godfrey, CPA)
Thank you very much for this guide into a new area for me.
Olga Malkiman
(Director of Accounting at Flock Safety Inc)
Nice comparison between 605 and 606 criteria and outcomes
Brett Maxam
(CFO at SSP Innovations)
Very helpful in breaking down changes to new guidance.
Anonymous
(Corporate)
Very informative course exam questions are a bit vague
Anonymous
(Consultant)
Good course overall. maybe too much on asc 605 though?
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
.
Lynn FountainCPA, CGMA, CRMA, MBA, cPIA, Consultant, Author, Trainer
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