Volume 7, No. 8


Accounting For Software Revenues: The Changes Take Effect:  Revenues linked to the distribution of software have presented some knotty recognition problems in the past. A new standard issued by the Accounting Standards Executive Committee of the American Institute of CPAs resolves a number of these problems: Statement of Position 97-2, "Software Revenue Recognition," became effective at the beginning of 1998 for calendar year companies. The previous standard governing software revenue recognition had enough fuzz in it to allow companies to take aggressive stances on recognizing revenue. This standard should appreciably clean up the fuzz. Conceivably, it could slow the perceived revenue growth in some firms - if they had been recognizing revenues too quickly under the old standard. One bright spot: the new accounting should lead to the rise of deferred revenues balances, which can help smooth out the cyclicality of reported revenues and earnings.

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