This next video illustrates "Percent Based" revenue allocation in accordance with a companies 606 policy. In the example the company sells a single perpetual license that in accordance with policy requires 75% of the revenue to be allocated to the software and the remaining 25% to support.
In order to make this happen we introduce two performance obligations (one for the license and the other for support) and allocate the revenue between them using the "percent net" method and then recognize the license as "point in time" on the sale date whereas support is recognized ratably over a 12 month term.

Was this article helpful?
Thank you!