Re: | Amdocs Limited Form 20-F for the Fiscal Year Ended September 30, 2010 Filed December 7, 2010 File No. 001-14840 |
Response: | The Company had authorized Mr. Schwed to act as its agent in this regard; however, in response to the Staffs comment, the Company has made the requested representations under its own letterhead under separate cover. |
Response: | As communicated in the Companys response letter to the Staff dated February 9, 2011, the Company establishes VSOE of fair value for its on-going support and maintenance services based on the price that is charged when such elements are sold separately. | ||
In calculating VSOE for these services, the Company believes that prices are sufficiently clustered within an appropriate range by requiring that a high percentage of all relevant standalone sales fall within a reasonable percentage (plus or minus) of the established VSOE value. The Companys minimum threshold requirement is that at least 70% of all the standalone sales in the period fall within a range of plus or minus 15% of the established VSOE value. | |||
The percentages of standalone sales for on-going support and maintenance services that have fallen into the 15% range have been fairly constant over the last several years. In fiscal 2010 and 2009, 71%-75% and 70%-83%, respectively, of the standalone sales of the various strata of on-going support and maintenance services have been within the specified range of the VSOE value. | |||
The Company notes that substantial majority is not a defined phrase in the authoritative accounting guidance, and therefore the determination of VSOE of fair value requires the application of reasonable judgment in |
deciding upon the appropriate percentage of standalone sales that falls within a narrow range of pricing. The Company notes that some common interpretations of substantial majority range from two-thirds (66%) to as high as 80% of a population. Therefore the Company believes that, for purposes of establishing VSOE of fair value, it is reasonable to conclude that a substantial majority falls within this percentage range. In making this determination, the Company considered all the relevant facts and circumstances surrounding these transactions, including but not limited to, the pricing strategies for each element, the trend and consistency in pricing for each element, and the reasons for any prices outside the Companys historical range of VSOE for a particular element. Based on these factors and giving due consideration to common interpretations of substantial majority, the Company concluded that, at a minimum, 70% of its standalone sales in the period must fall within a range of plus or minus 15% of the established VSOE value in order to constitute a range that is sufficiently clustered to support a conclusion that VSOE of fair value exists. | |||
The Companys VSOE rates are used to allocate revenue consideration to the identified deliverables in multiple element arrangements. In instances where the amounts stated in a particular contract are not within the VSOE range, the Company has used the midpoint within the VSOE range to allocate revenue between the identified deliverables specified in the contract. The Company notes that arrangements in which the stated contract price of an undelivered element was higher than the VSOE range have been rare and the use of the midpoint has not resulted in any significant differences in the allocation of revenue to the various identified elements within these arrangements or the timing of revenue recognition. | |||
The application of the Companys VSOE methodology and the VSOE rates that were established under such methodology remain consistent from period to period. |