Support.com 2008 Annual Report Download - page 62

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Table of Contents
SUPPORTSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Firms that serve as channel partners for us are generally invoiced monthly for services delivered during that period (i.e., a sale is made through to their
end-user). Fees from transactions directly with consumers are generally paid with a credit card at the time of delivery. For incident-based services, revenue is
recognized during the period in which the services are delivered. For subscription-based services, revenue is recognized ratably over the subscription period. Our
direct-to-consumer channel generally provides a five-day warranty period during which refunds may be granted. With partners, the warranty period varies across
channels, and in some channels our partner bears the cost of refunds. We recognize revenue net of refunds at the end of the warranty period. Refunds have not
been material to date.
We also license certain of our Consumer software products to channel partners who use our software to provide services to their customers. Such channel
partners are charged a per-use fee for the software and revenue is recognized in the period usage occurs.
Enterprise Revenue
We recognize revenue in accordance with the American Institute of Certified Public Accountants’ (AICPA) Statement of Position (“SOP”) 97-2, Software
Revenue Recognition, as amended by SOP 98-4 and SOP 98-9. License revenue is recognized when all of the following criteria are met:
• Persuasive evidence of an arrangement exists;
• Delivery has occurred;
• Collection is considered probable; and
• The fees are fixed or determinable.
SupportSoft considers all arrangements with payment terms longer than 90 days, not to be fixed or determinable. If the fee is determined not to be fixed or
determinable, revenue is recognized as payments become due from the customer. Revenue is recognized net of any applicable sales tax.
License revenue is comprised of fees for perpetual and term licenses of our software. Perpetual license revenue is recognized using the residual method, in
compliance with SOP 98-9 for arrangements in which licenses are sold with multiple elements. We allocate revenues on these licenses based upon the fair value
of each undelivered element including undelivered maintenance, consulting and training. The determination of fair value is based upon vendor specific objective
evidence (VSOE). VSOE for maintenance is based upon separate renewals of maintenance licenses from customers. VSOE for consulting or training is based
upon separate sales of these services to customers. Assuming all other revenue recognition criteria are met, the difference between the total arrangement fee and
the amount deferred for each undelivered element is recognized as license revenue.
Term licenses are sold with maintenance for which SupportSoft does not have VSOE to determine fair value for maintenance fees. As a result, license
revenue for term licenses is recognized ratably over the duration of the agreement. License revenue in the accompanying financial statements includes
maintenance for term licenses. We do not allocate maintenance revenue from term licenses to maintenance revenue, as we do not believe there is an allocation
methodology that provides a meaningful and supportable allocation between license and maintenance revenues. Services revenue associated with the term
licenses are recognized ratably over the period associated with the initial payment, generally one year.
We provide resellers with the right to distribute our software to end user customers. Generally, we recognize revenue from our arrangements with resellers
when we receive persuasive evidence that the reseller has actually
59
Source: SUPPORTSOFT INC, 10-K, March 11, 2009