What is multiple element arrangement?

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

What’s the difference between ASC 605 and 606?

Under 605 these variable revenues were only booked when recognized. *ASC 606 eliminates sell-through methods of revenue recognition. Companies used to wait until a reseller sold the product to an end customer and net that against price concessions and returns.

What is MEA in accounting?

MEA stands for Multiple Element Arrangement (accounting)

How are revenues earned from multiple element arrangements?

Revenues from contracts with multiple element arrangements are recognized as each element is earned based on the relative fair value of each element provided the delivered elements have value to customers on a standalone basis.

How does GAAP work for multiple element arrangements?

This guidance modifies the fair value requirements of revenue recognition on multiple element arrangements by allowing the use of the “best estimate of selling price” in addition to vendor specific objective evidence and third-party evidence for determining the selling price of a deliverable.

What is accounting for multiple deliverable revenue arrangements?

Detailed discussion of the guidance in ASC 606, its effective date and the differences it will bring to the accounting for multiple-deliverable revenue arrangements is provided in our white paper, Revenue recognition: A whole new world.

What causes accounting challenges in a multiple element arrangement?

Once the separate performance obligations in a multiple-element arrangement are identified, additional accounting challenges will result from allocation of the transaction price between performance obligations and the recognition of the allocated transaction price.