Wind River going up, up, up! Message Board

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Technology Stocks : Wind River going up, up, up!

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To: umbro who wrote (7935)	6/7/2000 5:43:00 PM
From: JMD	Read Replies (2) of 10309

umbro, my MBA is pretty rusty and I really want to caution you that the following is just a rough guideline that we can both hope a financial CPA on the thread edits heavily, but: deferred revenue, as a liability, is effectively the vendor saying: Well, I just sold a customer $100 worth of software but I don't really know what my 'cost of goods sold' was. [contrast with a vendor who sells a lamp for $100 and knows his cost of goods immediately] Why? Unlike the lamp, the software will require continuing support, debugging, new releases, customer training, and so on. No way to estimate precisely, so a reserve is set up as a catch-all to cover all the above. Once the product is 'accepted' by the customer and performing properly, the liability account can be reduced and revenues or expenses increased as appropriate. I will now retire and wait for the green eyeshade mafia to take me to task. best, mike doyle

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