Ober is a car reservation service that provides telephone reservations for nearly 10,000 independent drivers. Ober has wanted to completely automate its service by providing Internet-based real-time on-line reservations. Under this system drivers would provide continuously updated availability for riders, so that customers would be able to book their reservations.

Ober has completed an extensive study into the feasibility of such a system and has determined that it is both feasible and marketable to both its existing car service subscribers, and well as at least an additional 20,000 potential customers.

BuildSoft Consultancy [BSC] develops and sells computer applications software solutions for its clients. BSC has a proprietary enterprise software platform that it custom-tailors to meet its clients’ needs. With the modifications, the software would be tailored for Ober’s business.

Because Ober does not have the necessary resources, it engages BSC to develop the software application to meet its needs. Ober agrees to pay BSC $500,000 to develop and install the software [installation includes operational training for client personnel]. . BSC will also provide system maintenance and support for two years

The terms include a payment of $250,000 on contract signing [non-refundable] and $250,000 when the system is installed and training of Ober staff is completed.

BSC does not sell the software, training or support separately. If it did so, BSC would charge $450,000 for the software, $60,000 for the training and $90,000 for the support.

BSC has performed similar assignments for other clients and determines that the entire project to modify and install its enterprise software will be operational in one year.

1. Viewed from BSC’s point of view:

a. Argue that this a startup activity.

b. Argue that this is not a startup activity.

Be sure to cite appropriate authoritative literature [ASC] in support of your response

2. BSC accounting for the revenue from this arrangement

Be sure to cite appropriate current ASC in support of your response, applying the necessary steps for revenue recognition.

Open the following embedded spreadsheet by doubling-clicking on it. You may copy it to your response document before or after preparing your solution [see below].

Identify the performance obligations and allocate the contract price to calculate the revenue to be recognize for each performance obligation.

Briefly describe when recognition occurs for each performance obligation.