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Multi-Element Arrangements

Posted on November 7th, 2015 by Sanjit Anand ||Email This Post Email This Post

Multi-element arrangement aka occurs when a vendor agrees to provide more than one product or a combination of products and services to a customer in an arrangement.

Multi-element arrangements may include additional software products, rights to purchase additional software products at a significant incremental discount, specified upgrades or enhancements, hardware, PCS or other services.

Multiple-element arrangements must be evaluated for separation to determine whether there are multiple units of accounting within the multiple-element arrangement.

Definition of “Arrangement” – A group of contracts or agreements may be so closely related that they are, in effect, parts of a single arrangement.

The form of an arrangement is not necessarily the only indicator of the substance of an arrangement.

The existence of any of the following facts but not limited to may indicate that a group of contracts should be accounted for as a single arrangement:

  • The contracts or agreements are negotiated or executed within a short time frame of each other.
  • The different elements are closely interrelated or interdepent in terms of design, technology, or funtion.
  • The fee for one or more contracts or agreements is subject to refund or forfeiture or other concession if another contract is not completed satisfactorily.
  • One or more elements in one contract or agreement are essential to the funtionality of an element in another contract or agreement.
  • Payment terms under one contract or agreement coincide with performance criteria of another contract or agreement.

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