Software revenue

Motive, Inc. disclosed in an 8-K, that it would have to restate its past financial results because of difficulty applying the software revenue recognition rules.

The discussion of the software issue demonstrates how difficult it is to apply software revenue recognition rules.

Specifically, the 8-K reported:

In its 8-K, Motive said it recently concluded that insufficient evidence existed to support the Company's prior determination that vendor specific objective evidence (VSOE) of fair value for maintenance existed for the majority of its software arrangements. Generally speaking, the presence of VSOE of fair value permits the revenue of a bundled software arrangement to be allocated among that arrangement's various elements, such as license, maintenance, consulting, and hosting services.

The absence of VSOE of fair value is expected only to impact the timing of revenue recognized and does not call into question the validity of the underlying transactions or revenue. Generally speaking, the absence of VSOE of fair value is expected to result in the recognition of revenue over longer periods of time.