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The contract

Ace Partners, a software developer, enters into a contract with a customer, Jones Inc., to transfer a software license, perform an installation service, and provide unspecified software updates and technical support (online and telephone) for a two-year period. ACE Partners sells the license, installation service, and technical support separately. The installation service includes changing the web screen for each type of user (for example, marketing, inventory management, and information technology). The installation service is routinely performed by other software developers and does not significantly modify the software. The software remains functional without the updates and the technical support.

Assessment considerations

 Ace Partners assesses the goods and services promised to the customer Jones Inc. and observes that the software is delivered before the other goods and services and remains functional without the updates and the technical support.

 Ace Partners took into consideration the fact that, although they integrate their software into the system of Jones Inc., the installation services do not significantly affect their customer’s ability to use and benefit from the software license because the installation services are routine and can be obtained from alternate software providers.

 The software updates do not significantly affect Jones Inc.’s ability to use and benefit from the software license because the software updates in this contract are not necessary to ensure that the software maintains a high level of utility to Jones Inc. during the license period.

 Ace Partners observes that none of the promised goods or services significantly modifies or customizes one another and that they are not providing a significant service of integrating the software and the services into a combined output.

Conclusion

Based on Ace Partners’ assessment, the following four performance obligations have been identified in the contract with Jones Inc.:

 The software license

 An installation service

 Software updates

 Technical support

Ace Partners reached the above conclusion because of the following

 Jones Inc. can benefit from the updates together with the software license transferred at the outset of the contract. Thus, Ace Partners concludes that its customer, Jones Inc., can benefit from each of the goods and services either on its own or together with the other goods and services that are readily available.

 The software and the services do not significantly affect each other and, therefore, are not highly interdependent or highly interrelated because Ace Partners would be able to fulfill its promise to transfer the initial software license independent from its promise to subsequently provide the installation service, software updates, or technical support.