As to whether royalties will increase as a percent of sales over time, it would seem that now that WIND reports the royalty figure, we can track that, and time will tell.
We should bookmark this, if for no other reason than to see if my statistics are reliable.
I'd assume there is no reason they couldn't declare the pre-paid royalties upon receipt (there is no obligation to deliver anything further, except the right to mfg. 'n' units, right?). Does the pro-rating simply smooth out the revenue curve?
As far as I know, there is no accounting requirement that WIND prorate pre-paid royalties, for the very reason you mentioned: there is no obligation to deliver anything further. I believe WIND prorates significant pre-paids to smooth revenues in a fashion they believe corresponds to the rate at which the resource, i.e. target licenses, is expended. Personally, I have always liked the policy, and I believe it is perfectly consistent with the spirit of accrual accounting, whether required or not.
If you can find the meesage# for that post, I'd like to read it.
Message #4437. There is no reason to update it because management now is reporting royalty separately.
If the pre-paids are not immediately shown as revenue, when received, then where do the pre-paids show up? As some sort of 'intangible' on the balance sheet?
They have to show up in deferred revenues, along with pre-paid maintenance and possibly other sales deemed not yet earned.
Allen |
