The new guidance permits a company to make its best

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Unformatted text preview: on their relative selling prices. The new guidance permits a company to make its best estimate of the selling price of deliverables when more objective evidence of selling price is not available. The hierarchy to be used to determine the selling price to be used for allocating revenue to deliverables is: (1) VSOE, (2) third-party evidence of selling price ("TPE"), and (3) best estimate of the selling price ("ESP"). A majority of Dell product and service offerings are sold on a standalone basis. Because selling price is generally available based on standalone sales, Dell has limited application of TPE, as determined by comparison of pricing for products and services to the pricing of similar products and services as offered by Dell or its competitors in standalone sales to similarly situated customers. As new products are introduced in future periods, Dell may be required to use TPE or ESP, depending on the specific facts at the time. spi2532X_appB_B1-B24.indd B-9 spi2532X_appB_B1-B24.indd B-9 1/20/12 4:20 PM 1/20/12 4:20 PM Confirming Pages B-10 APPENDIX B Dell Annual Report (selected pages) DELL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For Fiscal 2010 and Fiscal 2009, pursuant to the previous guidance for Revenue Arrangements with Multiple Deliverables, Dell allocated revenue from multiple element arrangements to the elements based on the relative fair value of each element, which was generally based on the relative sales price of each element when sold separately. The adoption of the new guidance in the first quarter of Fiscal 2011 did not change the manner in which Dell accounts for its multiple deliverable arrangements as Dell did not use the residual method for the majority of its offerings and its services offerings are generally sold on a standalone basis where evidence of selling price is available. Other Dell records revenue from the sale of equipment under sales-type leases as product revenue at the inception of the lease. Sales-type leases also produce financing income, which is included in net revenue in the Consolidated Statement of Income and is recognized at...
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This document was uploaded on 02/22/2014 for the course ACCT 6330 at University of Texas at Dallas, Richardson.

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