The recent draft rules proposed by the Financial Accounting Standard Board concerning the revenue recognition rules would not just change the way accounting folks would recognize and record the revenue, but it would also require the companies to change or revamp their accounting systems.
One such situation will be in implementing the draft rule of assigning fair value to bundled products. Under the draft rule companies will have to use the relative selling price method, which allocates revenue for bundled products on a percentage to assign fair value rather than the popular residual allocation method, which assigns a straight dollar amount of revenue to each element of a bundled product.
Generally Enterprise Resource Planning (ERP) systems built for software revenue recognition are configured to handle the percentage method, while most ERP systems are programmed to handle the residual allocation method. So most non software companies will have to revamp their ERP system to comply with the rule if and when it becomes a rule. Will it be a small tweak in the system or a work around situation or will it be an opportunity for small or even large vendors to come up with stand alone products catering to this niche market, only time will tell.
