Glossary

Vendor Specific Objective Evidence (VSOE)

VSOE is Fair Value for Software. The concept of VSOE, the term, and the methodologies for establishing it, were introduced in 1997 by the AICPA in their Statement of Position (SOP) 97-2: Software Revenue Recognition. SOP 97-2 governs how any company that licenses, sells, leases or otherwise markets software (unless it’s incidental to the product […]

VSOE is Fair Value for Software. The concept of VSOE, the term, and the methodologies for establishing it, were introduced in 1997 by the AICPA in their Statement of Position (SOP) 97-2: Software Revenue Recognition. SOP 97-2 governs how any company that licenses, sells, leases or otherwise markets software (unless it’s incidental to the product or service as a whole) must recognize the revenue. In particular, it governs how companies must recognize revenue from so-called “multiple-element arrangements” – bundles of software products and related services sold as a unit, at a single price. In establishing these special rules for software and VSOE, the AICPA has essentially set software uniquely apart from other products, and established a more difficult set of standards for companies to meet in order to put software revenue on their financial statements.

Area of Application
Revenue Recognition

Related Terms
Project Accounting
Activity Based Costing
Delivery
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