Eye Vision Case 10-11
Eye Vision Case 10-11
Eye Vision Inc, a long-standing medical device manufacturer, has signed a contract to sell Holland Hospital the Clear View Laser and a two-year separately priced maintenance plan for $1 million and $0.2 million respectively. On a when-and-if available bais, Eye Vision Inc. will provide software updats that is embedded with the Laser to maintainance purchasor. The software has never been sold without Laser for its functional necessity. In this memo, as explained below, we conclude that:
1. Eye Vision’s arrangement with Holland Hospital is not within the scope of ASC 985-605, Software: Revenue Recognition.
2. The deliverables in this arrangement are the Clear View Laser, embedded software, and maintenance plan, respectively.
3. The Clear View Laser together with embedded software and maintenance plan will be accounted for as separate units of accounting, respectively.
4. The laser with the embedded software will be recognized immediately. The maintenance plan will be recognized on a straight-line basis over the length of the contract.
1. Is Eye Vision's arrangement with Holland Hospital within the scope of ASC 985-605, Software: Revenue Recognition?
The agreement between Eye Vision and Holland Hospital is not within the scope of ASC 985-605, Software: Revenue Recognition.
According to ASC 985-605-15-4(e), subtopic ASC 985-605 does not apply to transactions and activities for "software components of tangible products that are sold, licensed, or leased with tangible products when the software components and nonsoftware components of the tangible product function together to deliver the tangible product's essential functionality." In the situation of the agreement, the clear view laser represents the tangible component, while the software component comes embedded internally within the laser. The case states, that the laser has never been sold without the software because the software is essential to its functionality in performing medical
Eye Vision Inc, a long-standing medical device manufacturer, has signed a contract to sell Holland Hospital the Clear View Laser and a two-year separately priced maintenance plan for $1 million and $0.2 million respectively. On a when-and-if available bais, Eye Vision Inc. will provide software updats that is embedded with the Laser to maintainance purchasor. The software has never been sold without Laser for its functional necessity. In this memo, as explained below, we conclude that:
1. Eye Vision’s arrangement with Holland Hospital is not within the scope of ASC 985-605, Software: Revenue Recognition.
2. The deliverables in this arrangement are the Clear View Laser, embedded software, and maintenance plan, respectively.
3. The Clear View Laser together with embedded software and maintenance plan will be accounted for as separate units of accounting, respectively.
4. The laser with the embedded software will be recognized immediately. The maintenance plan will be recognized on a straight-line basis over the length of the contract.
1. Is Eye Vision's arrangement with Holland Hospital within the scope of ASC 985-605, Software: Revenue Recognition?
The agreement between Eye Vision and Holland Hospital is not within the scope of ASC 985-605, Software: Revenue Recognition.
According to ASC 985-605-15-4(e), subtopic ASC 985-605 does not apply to transactions and activities for "software components of tangible products that are sold, licensed, or leased with tangible products when the software components and nonsoftware components of the tangible product function together to deliver the tangible product's essential functionality." In the situation of the agreement, the clear view laser represents the tangible component, while the software component comes embedded internally within the laser. The case states, that the laser has never been sold without the software because the software is essential to its functionality in performing medical