Public companies now have new revenue recognition rules to follow when booking sales for complex, multiple-element transactions and those involving software.

The Financial Accounting Standards Board has published two new Accounting Standards Updates that in some cases will give companies the ability to recognize revenue sooner on certain types of complicated transactions. Both new rules were recommended to FASB after being studied and developed by the Board’s Emerging Issues Task Force.

ASU 2009-13 – Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements gives companies more latitude to estimate the selling price of the individual components in a multiple-element sale, such as when a company bundles service or maintenance with the sale of a product. It will enable companies to recognize the revenue related to each of those components as they are delivered, which for some companies will accelerate recognition.

Previously, companies were prohibited from recognizing the revenue in batches unless they had evidence from their own business or that of a competitor of how the various pieces and parts of the transaction would be priced individually. If companies couldn’t produce such evidence, because for example they don’t sell a particular follow-up service separately, that meant deferring recognition of any revenue until all elements were delivered to the customer. That meant long delays in recognizing revenue for transactions that stretched over a period of years.

Under the new rule, companies will be allowed to estimate the price at which individual elements would be sold and recognize revenue as the individual elements are delivered, but they face extensive disclosure requirements to explain their estimates. Analysts have zeroed in on Apple as a company whose revenue will jump on adoption of the new rule because the company will be able to accelerate recognition on sales of its popular iPhone.

In ASU 2009-14 – Software (Topic 985): Certain Revenue Arrangements That Include Software Elements addresses concerns about the complexity of recognizing revenue when software becomes more than an incidental part of a product offering, subjecting the product to more complicated software revenue recognition rules.

Jay Hanson, national director of accounting for McGladrey & Pullen and a member of the EITF, said the software model adopted in 1997 is outdated. “It was appropriate at the time, but times have changed,” he said. “Technology has gotten far more prevalent in so many applications, it’s changed the scope of what falls into the accounting standard.”

Hanson said software employed by a car that can parallel park itself would subject the car to software revenue recognition standards. “It’s a cool feature to the car, but it doesn’t make sense” to account for a car as a piece of software, he said. “We’ve moved that bar a little so some odd consequences don’t result.”