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To: umbro who wrote (7929)	6/7/2000 3:27:00 PM
From: JMD	Read Replies (2) \| Respond to of 10309

umbro, if you'll forgive me butting in [well aware than allen benn can speak for himself], but re: ". Back to the question of accounting for pre-paids: 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?" MSFT accounts for this stuff as 'deferred revenues' and carries it as a short term asset. In MSFT's case that little item is pushing the billion dollar (or more) category if memory serves. Analysts have actually taken offense that Softie uses it to smooth earnings by taking $$ out of the deferred revenue account and bringing them into current revenues (which then of course drop straight to the bottom line) whenever there's a need to shore up a weak quarter. Personally, I think that's a bit absurd and prefer very, very conservative accounting treatment of software revenue recognition so WRS' methodology is fine with me. Take a peek at MSTR to see the penalty for taking a more aggressive stance. best, mike doyle

To: umbro who wrote (7929)	6/7/2000 9:49:00 PM
From: Allen Benn	Read Replies (3) \| Respond to of 10309

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