A vendor enters into a contract with a customer to supply a licence for a standard...
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A vendor enters into a contract with a customer to supply a licence for a standard off the shelf software package, install the software, and to provide unspecified software updates and technical support for a period of two years. The vendor sells the licence and technical support separately, and the installation service is routinely provided by a number of other unrelated vendors. The software will remain functional without the software updates and technical support. Required: Provide your own assumption, then show how to recognize revenue in each circumstance. 1/ Case 1: If the software is delivered separately from the other goods or services, can be installed by a different third party vendor, and remains functional without the software updates and technical support. 2/ Case 2: If the software installation service is to be substantially customised in order to add significant new functionality to enable the software to interface with other software already being used by the customer. The customised installation service can be provided by a number of unrelated vendors. 3/ Case 3: If the software installation service is to be substantially customised in order to add significant new functionality to enable the software to interface with other software already being used by the customer. However, •The vendor is the only supplier that is capable of carrying out the customised installation service • The software updates and technical support are essential to ensure that the software continues to operate satisfactorily, and the customer's employees continue to be able to operate the related IT systems A vendor enters into a contract with a customer to supply a licence for a standard off the shelf software package, install the software, and to provide unspecified software updates and technical support for a period of two years. The vendor sells the licence and technical support separately, and the installation service is routinely provided by a number of other unrelated vendors. The software will remain functional without the software updates and technical support. Required: Provide your own assumption, then show how to recognize revenue in each circumstance. 1/ Case 1: If the software is delivered separately from the other goods or services, can be installed by a different third party vendor, and remains functional without the software updates and technical support. 2/ Case 2: If the software installation service is to be substantially customised in order to add significant new functionality to enable the software to interface with other software already being used by the customer. The customised installation service can be provided by a number of unrelated vendors. 3/ Case 3: If the software installation service is to be substantially customised in order to add significant new functionality to enable the software to interface with other software already being used by the customer. However, •The vendor is the only supplier that is capable of carrying out the customised installation service • The software updates and technical support are essential to ensure that the software continues to operate satisfactorily, and the customer's employees continue to be able to operate the related IT systems
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