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Reynolds & Reynolds

[REYNOLDS & REYNOLDS LOGO]

April 12, 2005

Craig Wilson

Senior Assistant Chief Accountant

U.S. Securities and Exchange Commission

Division of Corporation Finance

Washington, D.C. 20549

    Re:

    The Reynolds and Reynolds Company

File no. 001-10147

Form 10-K: For the Year Ended September 30, 2004

Form 10-Q: For the Quarterly Period Ended December 31, 2004

Dear Mr. Wilson,

We are pleased to provide the following responses to the staff comment letter dated March 22, 2005.
For convenience of reference, our responses are organized using the same headings and numbered
captions as your letter.

Annual Report on Form 10-K for the Year Ended September 30, 2004

Item 7. Management Discussion and Analysis of Financial Condition and Results of
Operations

Services, page 15 and Documents, page 16

    1.
    Question

    We note that 2004 Services revenue declined, in part, because of the loss of a customer and that
2004 and 2003 Documents sales declined, in part, because of a decrease in volume and price (page
16). Tell us the amount that revenue decreased due to the loss of this customer and due to
changes in volume and pricing. Tell us what consideration you gave to discussing the impact of
these events and fluctuations caused by changes in volume and price. We refer you to Regulation
S-K, Rule 303(a)(3)(i) and 303(a)(3)(iii).

    Answer

The services segment included the campaign management services business. A customer did not
renew a campaign management services contract effective April 1,
2003. Therefore fiscal year 2002 included twelve months of revenues from this customer, fiscal year 2003
included six months of revenues from this customer and fiscal year 2004 did not include any
revenues from this customer. Campaign management services revenues from this customer were
$9,529,000 in 2002, $5,284,000 in 2003 and $0 in 2004.

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    On page 16 of its Annual Report on Form 10-K, management stated that documents sales declined in
both 2004 and 2003 because of a decrease in the volume of business forms sold which more than
offset the effect of annual price increases to offset inflation. The intent of this statement
was to convey that the primary reason for the sales decline was lower volume as sales prices
were only increased to offset inflation. Management went on to explain that a portion of the
2004 volume decline occurred because the company decided to stop selling certain low margin
products. It is difficult to determine the exact amount realized from sales price increases or
volume declines. Management estimated that the impact of higher sales prices was to increase
sales by about two percent in both 2003 and 2004. Management also estimates that the impact of
lower volume was to decrease sales by about seven percent in both 2003 and 2004. This analysis
supports the intent of management’s statement which was to convey that the decline in volume was
the reason for the sales decline.

Consolidated Balance Sheets, page 35

    2.
    Question

We note that you segregate your Consolidated Balance Sheets and your Statements of Condensed
Consolidated Cash Flows between automotive solutions and financial services. Your presentation
does not appear to fully comply with the provisions of Articles 3-01 (a) and 3-02 (a) of
Regulation S-X. Revise future filings to present your Consolidated Balance Sheets and
Statements of Condensed Consolidated Cash Flows on a consolidated basis without segregating
automotive solutions and financial services assets, liabilities and cash flows. We would not
object to you also including balance sheets and cash flows as currently presented with
appropriate headings, such as supplementary balance sheets and cash flows, in your financial
statements. If you choose to present segregated balance sheets and cash flows, those financial
statements should follow your consolidated balance sheets and consolidated cash flows.

    Answer

The Reynolds and Reynolds Company (the Company) has presented its consolidated balance sheets
using a tiered approach with respect to the presentation of automotive solutions and financial
services since the 1989 adoption of Statement of Financial Accounting Standards No. 94. The
Company has presented its statements of condensed consolidated cash flows using this tiered
approach since 1991. The Company has presented financial statements in this manner in an
attempt to make the financial results of the operating company and the financing arm of the
Company easier to understand. In September 1994, the Company received a comment letter from the
staff (attached as Appendix A) which noted the use of a tiered approach in presenting financial
information about automotive solutions and financial services. The staff requested that the
Company not present condensed financial services information on the face of the statements of
cash flows, but did not object to the tiered presentation. The Company’s response to the
staff’s 1994 comment is included

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    in Appendix B. The tiered approach, which does not classify the balance sheet for financial services, is
commonly used in the automotive industry by companies which have both an operating company and a
financial services business. This approach is also consistent with guidance contained in the
SEC Training Manual, Appendix A I. A., which does not require a classified balance sheet for
leasing and financing operations. Regulation S-X, Article 9 governs reporting for bank holding
companies and also does not require the presentation of a classified balance sheet. Regulation
S-X, Article 5-01 indicates that Article 5 does not apply to financing operations. The
Company’s financial services business is also reported as a separate operating segment of the
Company and the information presented on the face of the balance sheet is consistent with the
information presented in the segment footnote. The Company believes that it is appropriate to
continue to use the tiered approach in presenting its financial information in order to aid
investors in understanding the different businesses, their assets, use of debt and cash flows.

    3.
    Question

We note that your other current assets, other assets and other current liabilities have
significant balances at the end of each year presented. Tell us what is included in these
balances and the related amounts. Tell us what consideration you gave to the following.
Stating separately any other current asset that is in excess of five percent of total current
assets, in accordance with Regulation S-X, Rule 5-02 (8).
Stating separately any other asset that is in excess of five percent of total assets, in
accordance with Regulation S-X, Rule 5-02 (17).
Stating separately any other current liability that is in excess of five percent of total
current liabilities, in accordance with Regulation S-X, Rule 5-02 (20).

    Answer

The Company did consider Regulation S-X, Rule 5-02 (8), Regulation S-X, Rule 5-02 (17) and
Regulation S-X, Rule 5-02 (20) in determining what items and amounts to report in its
consolidated balance sheets for the years ended September 30, 2004 and 2003.

    •
    Total prepaid expenses and other current assets were $25,039,000 and $19,763,000 as of
September 30, 2004 and 2003, respectively. Five percent of total current assets was
$13,762,700 in 2004 and $14,484,550 in 2003. There were no individual items included in
prepaid expenses and other current assets in excess of these amounts in either year. See
Appendix C for a detail listing of individual items and related balances for each year.

    •
    Other assets were $79,426,000 and $89,498,000 as of September 30, 2004 and 2003,
respectively. Five percent of total assets was $53,043,350 in 2004 and $57,091,800 in
2003. There were no individual items included in other assets in excess of these
amounts in either year. See Appendix C for a detail listing of individual items and
related balances for each year.

    •
    Other current liabilities were $27,093,000 and $21,041,000 as of September 30, 2004
and 2003, respectively. Five percent of total current liabilities was $6,967,250 in 2004
and $7,189,150 in 2003. There were no individual items included in other current
liabilities in excess of these amounts in either year. See Appendix C for a detail
listing of individual items and related balances for each year.

3

Note 1. Summary of Significant Accounting Policies

Revenue Recognition, page 40

Background

Questions 4-8 deal with various aspects of revenue recognition. To facilitate answering the
following questions, the Company is providing a more detailed overview of its business, contracts,
billing and revenue recognition.

The Company is in the business of providing complete turnkey computer solutions to its customers.
The primary customers for the Company’s products and services are automobile dealerships. The
Company’s turnkey solution approach provides customers with hardware, perpetual software licenses,
hardware installation services, software training services, software support (including both
software enhancements and telephone support) and hardware maintenance services. The Company is not
obligated under its contracts with customers to provide future software enhancements. All
components of the transaction are generally included within one contract with the customer. There
are no stated right of return or refund provisions. The software support and hardware maintenance
components may be renewed at a stated renewal rate after the initial term.

The “one-time sale” component of the solution consists of hardware, perpetual software licenses,
hardware installation and software training and is invoiced upon shipment of the hardware. At the
time of sale, customers are given the option to finance the hardware, perpetual software license,
installation and training through the Company’s financing subsidiary. Most customers choose to
finance the “one-time sale” using Company provided financing. Monthly lease payments are required
to begin once implementation is completed and the customer signs a certificate of acceptance,
acknowledging that all products and services have been delivered. Interest rates and/or financing
terms are set based on current market conditions, customer credit worthiness and the Company’s
borrowing costs. Interest revenues are recognized over the term of the financing arrangement using
the effective interest rate method. Sales prices are not affected by a customer’s decision to
finance their purchase. The “recurring revenue” component of the transaction consists of post
contract support (PCS), software support and hardware maintenance, and is invoiced in monthly
installments and not included in the financing contract. Upon completion of implementation
services, the only remaining deliverables are these support services.

The Company has concluded that the software is more than incidental to the products and services as
a whole. Therefore, the Company considered the guidance in EITF 03-5 and concluded that the
software, installation, training and software support are within the scope of SOP 97-2. However,
because the software is not essential to the functionality of the hardware included in the
Company’s arrangements, the hardware and hardware maintenance are therefore excluded from the scope
of SOP 97-2.

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The Company has established Vendor Specific Objective Evidence (VSOE) of fair value for the
recurring component of the transaction based on the renewal rate as allowed by paragraph 57 of SOP
97-2. Recurring revenues (software support and hardware maintenance) are recognized ratably as
services are provided. The company cannot establish VSOE for the individual components of the
“one-time sale” because the items are not typically sold separately. The company finances the
majority of its one-time sales, including hardware, through its separate financing subsidiary.
Under the terms of the financing agreement, the customer does not assume ownership of the hardware
and therefore, the arrangement is accounted for as a lease under SFAS 13. Paragraph 4(a)(ii) of
EITF 00-21 requires bifurcation of the lease even if the other separation criteria of EITF 00-21
have not been met. Applying EITF 00-21, the Company allocates the consideration in the contract
between the hardware element and the elements considered to be software related. The Company is
not considered a hardware dealer because it only sells one brand of equipment to customers that use
its software as opposed to a dealer that sells many brands to many different customers for multiple
uses. As a result, in accordance with paragraph 5(c)(ii) of SFAS 13 the fair value of the hardware
for purposes of applying the concepts in EITF 00-21 is considered to be its cost. Accordingly, the
Company allocates the fair value of the hardware (which equals the cost) to the hardware and
applies the provisions of SFAS 13. Revenues associated with the remainder of one-time fees
(software licenses, hardware installation and software training) are considered to be software
related and subject to SOP 97-2, and since VSOE does not exist for the remaining deliverables
(other than support services), the revenues associated with the perpetual licenses, installation
and training are recorded over the system implementation period as the solution becomes available
for use by the customer. The implementation period varies by solution. The typical implementation
period for the Company’s ERA dealer management system is approximately 90 days.

Generally, software is licensed to customers for use on hardware operated at the customer location.
Some software, however, is offered as an “application on-demand” in which the Company hosts the
software application at Company controlled sites and customers access the software from their
location using the Internet or similar tools. If a customer elects to utilize the application
on-demand delivery method, the Company does not give those customers the contractual right to take
possession of the software at any time during the hosting period. Therefore, the Company has not
met the delivery criteria of EITF 00-3 and concluded that these hosting arrangements are outside
the scope of SOP 97-2. Revenues from hosted software applications are therefore recorded ratably
over the contract period. Any upfront setup or training fees are deferred and recognized over the
contract term according to SAB Topic 13-A.

    4.
    Question

We note your disclosure with regard to arrangements that contain multiple elements. Tell us
whether you apply the provisions of EITF 00-21 and/or SOP 97-2 (including SOP 98-9) to your
multiple element arrangements.

    Answer

As previously described in detail under the background caption, because the Company’s contracts
contain both software and non-software related elements, the Company applies the provisions of
both EITF 00-21 to certain multiple element arrangements and/or SOP 97-2 (including SOP 98-9) to
its other multiple element arrangements.

5

    Question

Further, tell us how you have established fair value for each element in your multiple element
arrangements including but not limited to services, hardware, documents and financial services.

    Answer

See the background caption for a discussion of VSOE and revenue recognition of hardware,
software licenses, hardware installation services, software training services, software support
(including both software enhancements and telephone support) and hardware maintenance services.

    Documents are normally sold apart from software in a separate contract without any other
elements.

    Question

As it relates to your financial services arrangements specifically address how you determine the
fair value of the interest rate on your loans to customers and products being financed.

    Answer

Financial services revenues represent interest on the financing contracts. Interest rates are
s