Combining Desktop and Cloud Software: Hybrid Contracts

Keywords

hybrid software contracts, subscription revenue model, ASC 606 judgment

Abstract

In today’s mobile and interconnected world, many software companies offer cloud services in conjunction with software licenses, leading to increasingly complex contracts. Additionally, companies across many industries are starting to bill customers using a recurring subscription model. Many software companies find it difficult to apply the five-step model found in Accounting Standards Codification (ASC) 606 to these software-cloud-hybrid transactions, especially with the elimination of software industry-specific guidance. This article begins by providing a revenue recognition foundation and explores areas of software hybrid contracts that may require significant judgment. We conclude with a hybrid contract case study that illustrates how to properly apply professional judgment within the context of ASC 606.

Original Publication Citation

Combining Desktop and Cloud Software: Hybrid Contracts (C. Moffat and T. J. Wilks), RevenueHub, August 8, 2017. (2,443 unique views as of Jan. 13, 2023)

Document Type

Peer-Reviewed Article

Publication Date

2017

Publisher

RevenueHub

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Full Professor

Link to Full Text

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