VSOE Revenue Recognition Examples

The following examples of vendor-specific objective evidence (VSOE) revenue recognition illustrate possible VSOE scenarios you are likely to come across in your usual workflows.

Each scenario includes examples of VSOE transactions with various VSOE settings, statuses, and pricing information for items, such as the following:

• various delivery statuses

• various deferral settings

• matching/non-matching VSOE and invoice pricing

• complete/incomplete VSOE prices

• complete/incomplete invoice prices

In this group of examples, all items on the sale have a VSOE price indicated.

VSOE Scenario 1

These transactions have the following attributes:

• All items have a VSOE price.

• The sales amount of the transaction equals the total VSOE amount.

• No discount items or specified upgrades are included.

• The invoice price is different than the VSOE amount, for some items.

The Example 1 bundle has known VSOE prices for all items and the VSOE allocation amount is equal to the VSOE price. Because all items are marked delivered, revenue recognition schedules are created for all items.

The Example 2 bundle has known VSOE prices for all items and the VSOE allocation is equal to the VSOE price. Since the Support item is not delivered at the time of invoice, the $200 VSOE allocation amount for that item is deferred indefinitely and no revenue recognition schedule is created until it is marked delivered.

The Example 3 bundle has known VSOE prices for all items, but the total invoice price of the bundle is $2,000 more than the VSOE total. Therefore, amounts are not yet allocated because the item Professional Services has a deferral setting of Defer Bundle Until Delivered. This means that the VSOE allocation of all items in the bundle is deferred, or on hold, until this item is marked delivered.

VSOE Scenario 2

These transactions have the following attributes:

• All of the items have a VSOE price.

• No items are marked Defer Bundle Until Delivered.

• The total sales price of items is greater than the total VSOE price.

In Example 1 above, the VSOE price is allocated for delivered items. Allocation is deferred for items not yet delivered.

Products 101 and 103 are marked delivered and a recognition schedule is generated. The schedule recognizes the allocated VSOE price of each item, not the sales amount.

The VSOE price of Service 202 is deferred pending delivery.

In example 2 above, NetSuite allocates the percentage of the sales amount to each bundle member item based on the VSOE price of an item.

VSOE Scenario 3

These transactions have the following attributes:

• All of the items have an assigned VSOE price.

• No items are marked Defer Bundle Until Delivered.

• The total VSOE price of the bundle is greater than the total sales price.

• All items are set to Defer Until Item Delivered and have been delivered.

In Example 1 above, NetSuite allocates the appropriate percentage of the sales amount for each line item based on the VSOE amount for each item.

VSOE Scenario 4

These transactions have the following attributes:

• All of the items have an assigned VSOE price.

• At least one item is marked Defer Bundle Until Delivered.

In Example 1 above, Service 202's deferral status is Defer Bundle Until Delivered. The VSOE price is not allocated for any items until Service 202 is marked delivered.

• Service 202 is not allocated because it is not delivered

• Products 101 and 103 are not allocated even though they are delivered because Service 202 is not yet delivered

When Service 202 is marked delivered, NetSuite allocates the VSOE price of all items.

• Service 202 is allocated because it is delivered

• Products 101and 103 are allocated because they are delivered AND Service 202 is delivered

If the delivery statuses of items in the above example are changed, the effect is as described below:

VSOE Scenario 5

These transactions have the following attributes:

• The transaction includes a bundle-level discount.

• All items are delivered.

• The Residual Method does not apply to the bundle.

In this case, a discount affects the VSOE allocation of each item in proportion to its VSOE price, or total VSOE amount for multiple items. This effect on the VSOE allocation, shown in example 1 below, is the same for transaction-level discounts.

In example 2, there is an item-level discount on Software Product 401 and the Residual Method does not apply to the bundle. For sales or billing purposes, the discount applies to one specific item. However, for VSOE purposes, the discount is handled the same as a transaction-level or bundle-level discount. The discount affects the VSOE allocation of each item in proportion to their VSOE prices or VSOE amount.

General Notices