How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 477.19

-0.4%

3:59 PM EST

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To: Joan Osland Graffius who wrote (3063)	9/17/1997 11:28:00 AM
From: Exacctnt	of 74651

Joan, Your statement - << I use this as part of my evaluation of software companies to make sure they are successfully generating revenues and have the luxury to "hide" cash and make income on cash other than the cash stated on the assets side of the balance sheet.>> is very misleading. Microsoft is not hiding cash. Yes, they are reporting deferred revenue, but when they record the transaction they debit cash or accounts receivable and credit the deferred revenue. If they recorded accounts receivable, they will debit cash when payments are received and credit the account receivable balance. In no way are they hiding cash when reporting deferred revenue. When the time comes to report the deferred revenue as current sales, the simple entry required would be to credit sales, debit deferred revenue. The cash balance reported on their balance sheet is ACTUAL CASH. As a once-upon-a-time financial reporting/consolidations accountant, I thought you would want to know how these items are actually reported so that you may want to re-access how you are valuing those software companies that use the deferred revenue approach. Regards, Bob

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