Eye Vision Case 10-11 Essay

2111 Words Feb 8th, 2013 9 Pages
Eye Vision Case 10-11
Eye Vision Inc, a long-standing medical device manufacturer, has signed a contract to sell Holland Hospital the Clear View Laser and a two-year separately priced maintenance plan for $1 million and $0.2 million respectively. On a when-and-if available bais, Eye Vision Inc. will provide software updats that is embedded with the Laser to maintainance purchasor. The software has never been sold without Laser for its functional necessity. In this memo, as explained below, we conclude that:
1. Eye Vision’s arrangement with Holland Hospital is not within the scope of ASC 985-605, Software: Revenue Recognition.
2. The deliverables in this arrangement are the Clear View Laser, embedded software, and maintenance plan,
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2. Without each other, either the Clear View Laser or the embedded software provides no value to their customers.
Although this alternative position sounds reasonable, we uphold our conclusion above because in this arrangement the laser and the software are equally important in terms of functionality. We should consider them two separate products, even though they have never been sold separately and provide no value to customers independently.
3. On the basis of the responses to Question 1 and 2, what are the units of accounting in this arrangement?
The two units of accounting listed under the agreement between Eye Vision and Holland Hospital are the Clear View Laser and the maintenance plan. According to ASC 605-25-25-5, "In an arrangement with multiple deliverables, the delivered item or items shall be considered a separate unit of accounting if both of the following criteria are met." The first criterion under ASC 605-25-25-5 states, "The delivered item or items have value to the customer on a standalone basis. The item or items have value on a standalone basis if they are sold separately by any vendor or the customer could resell the delivered item(s) on a standalone basis." In the case, the Clear View laser is sold only with the embedded software for proper functionality. In the event the sale is isolated, the software and laser have no independent value to the consumer considering the safety reasons of the medical devices. The

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