Question

A software developer enters into a contract with a new customer to sell a software license and perform installation services. The entity sometimes sells the license and installation services separately. The installation service is routinely performed by other entities and does not significantly modify the software. The entity historically provided to new customers technical support for a 5-year period for no additional consideration. The contract does not specify the terms or conditions for the technical support services. Under ASU 2014-09, which of the following represents the performance obligations identified by the entity in this contract?
A. Three performance obligations:_______.
(1) Software license, (2) installation services, and (3) technical support services.
B. Two performance obligations:_______.
(1) Software license and (2) installation services.
C. One performance obligation:_______.
(1) Software license plus installation services.
D. Two performance obligations:________
(2) Software license plus installation services and (2) technical support services.

Answer 1

Answer:

A. Three performance obligations: 1. software license 2. installation support 3. technical support services

Explanation:

Under the ASU 2014-09, the obligations of the software developer includes software licensing, installation support as well as technical support services.

This is necessary because the software being developed is peculiar to the company that the software is being made for and as such would require that the software gets licensed by the appropriate council or board, assist with installing the software until personnel have been trained and/or contract expires and also provide support services for the software should it run into any problem while in use.

Cheers