SOX implications for publishing of software roadmaps? 2038



  • I’m a user of software products made by CodeGear, a subsidiary of Borland Corp. Some months ago CodeGear retracted their published roadmaps that informed customers of planned future developments for their software, explaining that SOX affected revenue recognition in an undesirable way for companies that would publish roadmaps. That is, it was fine for the company to have these plans and roadmaps internally, but as soon as they published them or gave customers an idea of what was planned, SOX would impose rules of revenue recognition that CodeGear wanted to avoid.
    Despite many long threads in CodeGear newsgroup forums about this issue, nobody from CodeGear has been able to give a coherent explanation of exactly what SOX rules or regs impose this undesirable revenue recognition on published software roadmaps. This revenue recognition is apparently imposed by SOX even if the company making the roadmap available to customers places disclaimers saying everything in the roadmap is subject to change, products discussed may never be released, etc.
    Can anyone here explain exactly what in SOX imposes revenue recognition rules on published software roadmaps, but does nothing when the same roadmaps are used internally but not published?
    Thanks.



  • SOX has ZERO IMPACT on revenue recognition.
    Revenue recognition is governed by accounting statndards.



  • SOX may have no impact on revenue Recognition, but revenue recognition, if accounted for incorrectly, could have an impact on SOX.
    I would suspect that there was some sort of accounting irregularity or risk in the internal approach taken when roadmaps were issued to customers and that someone has internally requested a change to the process. As such, they would probably not disclose the detail to their customers for fear of misinterpretation.
    We deal with a lot of agencies and distributors in my company, and, from time to time, we may receive a request for paperwork that just doesn’t seem right/ doesn’t comply with internal policies.
    In these cases, I will often recommend that Customer Services investigate the request further so as to ensure that we are not getting ourselves involved in sometiming that may be a little suspect.
    More often than not (much to my dismay), customer services email the third party with their queries, but they quote ‘SOX’ as the reason for their investigation over the request.
    There is no direct link to internal controls systems in these cases and therefore no direct link to SOX. It is merely good practice to ensure that our company is not getting involved in somthing irregular. Nonetheless, because the guidance they receive comes from me, they will quote ‘SOX’ as the direct reason to the customer.



  • I would suspect that there was some sort of accounting irregularity or risk in the internal approach taken when roadmaps were issued to customers and that someone has internally requested a change to the process. As such, they would probably not disclose the detail to their customers for fear of misinterpretation.
    Thanks for your help. While you may be right, that is not what CodeGear says. They say that the restrictions have been placed on them from the outside, by Ernst and Young acting as auditors for the federal government, and that no amount of disclaimer language in a published roadmap (telling customers everything is tentative and nothing can be relied on) can provide a ‘safe harbor’ from the accounting implications that arise because of SOX.
    Here’s an example of an exchange in the CodeGear newsgroups:

    This is the exact opposite of what the accounting firms and auditors –
    charged by the federal government with enforcing SOX rules – say.
    I’d be ecstatic if the word of newsgroup denizens were what determined
    how it all works, but alas, we have to listen to the likes of Ernst -and-
    Young. 😉

    Delphi Product Manager - CodeGear

    I haven’t gotten copies to read, but apparently the issue is clarified in papers available from Ernst and Young at:

    Especially the paper, ‘When Is a Product Roadmap a Separate Element of an Arrangement?’
    Perhaps this issue has nothing to do with SOX at all, but I’m curious why the company itself is telling customers that it’s entirely because of SOX.
    Any ideas?



  • If Ernst and Young have published a report, I woudl recommend taht you refer to it.
    It sounds like they might have referred to a specific section in US GAAP which requires the revenue to be recognised as such.
    This may be interpreted as SOX simply becuase SOX requires controls to prevent financial misstatement, and it may be that up to now, that control does not appear to have been in place on the basis that GAAP has been treated incorrectly.



  • I agree with EMM. SOX did not make one change to existing accounting GAAP. However, SOX testing may have identified issues where US GAAP was not being properly applied.
    SOX seems to have become the default reason why a lot of things can’t be done.


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