Extract from an article by Amanda Iacone (Bloomberg)
Tech Companies Log Billion-Dollar Boost From Accounting Change
The new standard replaces industry-specific rules and generally requires revenue to be recognized sooner. But differences exist depending on the business model and the mix of products.
Revenue from cloud-based services would continue to be recorded over the term of the contract, [Stacy] Dow said.
But revenue from licensed products, such as traditional software run on a customer’s own servers and computers, is now recognized upfront. Maintenance or support services revenue, however, will be spread out over the life of a contract or project, Dow said.
“On the revenue side, there’s not as much change for software-as-a-service companies,” as there is for tech companies that sell on-premise technologies, she said.
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