Unspecified Additional Software Products – FAQ | IFRS

Unspecified additional software products

As part of a contract with a customer, a software entity may license software today and promise to deliver unspecified additional software products in the future. For example, the software entity may agree to deliver all new products to be introduced in a family of products over the next two years. Revenue software and unspecified add-ons

 

Unspecified additional software products may be treated as a separately identifiable component under current IFRS by some entities. If so, the amount allocated to the component is recognised as revenue over the period that the products are provided. Other entities may account for the unspecified additional software products together with the related licence as a single component. The timing of revenue recognition, in those situations, may be affected by the licence. Revenue software and unspecified add-ons

 

Alternatively, since current IFRS does not provide detailed application guidance, some entities may look to US GAAP in developing their accounting policies. Under current US GAAP requirements1, unspecified additional software products are distinguished from PCS because the future components are products, rather than unspecified upgrades or enhancements. The software elements of these arrangements are often accounted for as subscriptions. Revenue software and unspecified add-ons

 

Revenue is not allocated to any of the individual software products. Instead, all software product-related revenue from the arrangement is recognised rateably over the term of the arrangement, beginning with delivery of the first product. Revenue software and unspecified add-ons

 

Under IFRS 15, software entities will be required to determine whether the promise to deliver unspecified additional software products is a performance obligation separate from the licence that it delivers. Software entities will also need to evaluate whether the promise to deliver unspecified additional software products is a stand-ready obligation to provide future products on a when-and-if available basis or individual promises to deliver specified future products. Revenue software and unspecified add-ons

Revenue software and unspecified add-ons

See also IFRS 15 IE 49 – IE 58

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