Avid 2014 Annual Report Download - page 37

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31
deliverable of the arrangement based on the relative selling prices of the deliverables. In such circumstances, we first determine
the selling price of each deliverable based on (i) VSOE of fair value if that exists; (ii) third-party evidence of selling price, or
TPE, when VSOE does not exist; or (iii) best estimate of the selling price, or BESP, when neither VSOE nor TPE exists. Revenue
is then allocated to the non-software deliverables as a group and to the software deliverables as a group using the relative selling
prices of each of the deliverables in the arrangement based on the selling price hierarchy. Our process for determining BESP for
deliverables for which VSOE or TPE does not exist involves significant management judgment. In determining BESP, we
consider a number of data points, including:
• the pricing established by management when setting prices for deliverables that are intended to be sold on a standalone
basis;
• contractually stated prices for deliverables that are intended to be sold on a standalone basis;
• the pricing of standalone sales that may not qualify as VSOE of fair value due to limited volumes or variation in prices;
and
• other pricing factors, such as the geographical region in which the products are sold and expected discounts based on the
customer size and type.
In determining a BESP for Implied Maintenance Release PCS, which we do not sell separately, we consider (i) the service period
for the Implied Maintenance Release PCS, (ii) the differential in value of the Implied Maintenance Release PCS deliverable
compared to a full support contract, (iii) the likely list price that would have resulted from our established pricing practices had
the deliverable been offered separately, and (iv) the prices a customer would likely be willing to pay.
We estimate the service period of Implied Maintenance Release PCS based on the length of time the product version purchased by
the customer is planned to be supported with Software Updates. If facts and circumstances indicate that the original service
period of Implied Maintenance Release PCS for a product has changed significantly after original revenue recognition has
commenced, we will modify the remaining estimated service period accordingly and recognize the then-remaining deferred
revenue balance over the revised service period.
We have established VSOE of fair value for all professional services and training and for some of our support offerings. Our
policy for establishing VSOE of fair value consists of evaluating standalone sales, where available, to determine if a substantial
portion of the transactions fall within a reasonable range. If a sufficient volume of standalone sales exist and the standalone
pricing for a substantial portion of the transactions falls within a reasonable range, management concludes that VSOE of fair
value exists.
The following table sets forth our determination of the estimated range of BESP of Implied Maintenance Release PCS, stated as a
percentage of the BESP of the underlying product being sold, and the estimated range of service periods of Implied Maintenance
Release PCS by product group for all periods presented in the consolidated financial statements.
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
Consumer video-editing software 1% to 6% 12 to 36 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
Consumer audio products 2% 24 months