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Strategies & Market Trends : Value Investing
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To: Q. who wrote (8811)10/29/1999 4:33:00 PM
From: Daniel Chisholm  Read Replies (1) of 78673
 
re: DEFERRED CONTRACT REVENUE, my understanding is that they have already received cash (or booked an A/R amount) for work that has not yet been performed. The amount of this liability balances out the amount of the cash or A/R item.

When the work is performed, no additional cash is received or A/R produced, the liability is reduced by the amount of work performed, and that is recognized as income at that time.

Microsoft does this. It is an attempt to smooth out product sales over the life cycle of the product.

- Daniel
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