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Board Seeks to Clarify Software Revenue Accounting Rules

May 8, 2019, 8:58 PM

Accounting rulemakers are seeking to clarify some—but not all—of U.S. companies’ confusion over recognizing software revenue.

The Financial Accounting Standards Board May 8 agreed to examine revenue recognition accounting rules for revenue earned from converting a software license contract to a software subscription service. FASB charged its Emerging Issues Task Force with issuing a recommendation to the board.

Determining the timing of contract conversion can be important because revenue from certain subscriptions is recorded over time while non-subscription software revenue can get recorded all at once.

“I think this issue is very pervasive,” FASB member Sue Cosper said.

The ...