Avid 2015 Annual Report Download - page 42

Download and view the complete annual report

Please find page 42 of the 2015 Avid annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 113

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113

36
Product Group
BESP of Implied
Maintenance
Release PCS (as a
% of Product
BESP) Estimated Service Period
Professional video creative tools 1% to 13% 18 to 72 months
Video storage and workflow solutions 1% to 2% 72 months
Media management solutions 1% to 3% 12 to 72 months
Digital audio software and workstations solutions 1% to 8% 12 to 36 months
Control surfaces, consoles and live-sound systems 1% to 5% 12 to 96 months
Notation software 4% to 8% 12 to 46 months
In accordance with ASU No. 2009-14, we exclude from the scope of software revenue recognition requirements our sales of
tangible products that contain both software and non-software components that function together to deliver the essential
functionality of the tangible products. We adopted ASU No. 2009-13 and ASU No. 2009-14 prospectively on January 1, 2011 for
new and materially modified arrangements originating after December 31, 2010.
Prior to our adoption of ASU No. 2009-14, we primarily recognized revenues using the revenue recognition criteria of Accounting
Standards Codification, or ASC, Subtopic 985-605, Software-Revenue Recognition. As a result of our adoption of ASU No.
2009-14 on January 1, 2011, a majority of our products are now considered non-software elements under GAAP, which excludes
them from the scope of ASC Subtopic 985-605 and includes them within the scope of ASC Topic 605, Revenue Recognition.
Because we had not been able to establish VSOE of fair value for Implied Maintenance Release PCS, as described further below,
substantially all revenue arrangements prior to January 1, 2011 were recognized on a ratable basis over the service period of
Implied Maintenance Release PCS. Subsequent to January 1, 2011 and the adoption of ASU No. 2009-14, we determine a
relative selling price for all elements of the arrangement through the use of BESP, as VSOE and TPE are typically not available,
resulting in revenue recognition upon delivery of arrangement consideration attributable to product revenue, provided all other
criteria for revenue recognition are met, and revenue recognition of Implied Maintenance Release PCS and other service and
support elements over time as services are rendered.
The timing of revenue recognition of customer arrangements follows a number of different accounting models determined by the
characteristics of the arrangement, and that timing can vary significantly from the timing of related cash payments due from
customers. One significant factor affecting the timing of revenue recognition is the determination of whether each deliverable in
the arrangement is considered to be a software deliverable or a non-software deliverable. For transactions occurring after January
1, 2011, our revenue recognition policies have generally resulted in the recognition of approximately 70% of billings as revenue
in the year of billing, and prior to January 1, 2011, the previously applied revenue recognition policies resulted in the recognition
of approximately 30% of billings as revenue in the year of billing. We expect this trend to continue in future periods.
Revenue Recognition of Non-Software Deliverables
Revenue from products that are considered non-software deliverables is recognized upon delivery of the product to the customer.
Products are considered delivered to the customer once they have been shipped and title and risk of loss has been transferred. For
most of our product sales, these criteria are met at the time the product is shipped. Revenue from support that is considered a
non-software deliverable is initially deferred and is recognized ratably over the contractual period of the arrangement, which is
generally twelve months. Professional services and training services are typically sold to customers on a time and materials basis.
Revenue from professional services and training services that are considered non-software deliverables is recognized for these
deliverables as services are provided to the customer. Revenue for Implied Maintenance Release PCS that is considered a non-
software deliverable is recognized ratably over the service period of Implied Maintenance Release PCS, which ranges from 1 to 8
years.
Revenue Recognition of Software Deliverables
We recognize the following types of elements sold using software revenue recognition guidance: (i) software products and
software upgrades, when the software sold in a customer arrangement is more than incidental to the arrangement as a whole and
the product does not contain hardware that functions with the software to provide essential functionality, (ii) initial support
contracts where the underlying product being supported is considered to be a software deliverable, (iii) support contract renewals,