Windows 10: With transition to Windows as service, Microsoft changes revenue recog

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  1. Posts : 20,783
    64-bit Windows 10 Pro build 16199
       27 Jun 2015 #1

    With transition to Windows as service, Microsoft changes revenue recog


    When Microsoft releases Windows 10 this summer, it will represent a shift in how the company has traditionally sold its OS. From a revenue recognition perspective, Windows will transition from a single point of sale model to a deferred revenue model because Windows 10 will be delivering software updates and features over time.

    Microsoft released a new PowerPoint deck, which you can find at the link below, which details how the company will adjust its revenue reporting because of this change. The biggest change is that deferred revenue will show up under the Corporate and Other line of the quarterly earnings statement.


    Read more: With the transition to Windows as a service, Microsoft changes up revenue recognition
      My ComputersSystem Spec

  2.    27 Jun 2015 #2

    This is a rather confusing spreadsheet and at first glance it appears like MS is talking about a subscription model, when it is not.

    The part of the article that comes after what Brink has quoted is this:

    The company clearly states in their slide deck that “there is no change to the software licensing business model and the associated method or timing of customer billings or cash collections,” meaning they will still charge up front but defer the revenue over a longer period.
    This change will only impact shareholders of the company and is another stake in the ground that the old way of buying and selling of software truly is in the past. Further, it goes to show how Windows 10 is truly a change to the way Microsoft typically conducted its operations with Windows becoming a service rather than a standalone sale.
    In other words, it's basically like taxes and depreciation.. They're collecting money up front, but they're not applying it right away, but rather over a 3 year period.
      My ComputerSystem Spec


  3. Posts : 3,506
    Win_8.1-Pro, Win_10.1607-Pro, Mint_17.3
       27 Jun 2015 #3

    The change in accounting pratices probably has more to do with FASB than Windows 10

    WHY DID THE FASB ISSUE A NEW STANDARD ON REVENUE RECOGNITION?
    Revenue is one of the most important measures used by investors in assessing a company’s performance and prospects. However, revenue recognition guidance differs in Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS)—and many believe both standards are in need of improvement.

    On May 28, 2014, the FASB and the International Accounting Standards Board (IASB) issued converged guidance on recognizing revenue in contracts with customers. The new guidance is a major achievement in the Boards’ joint efforts to improve this important area of financial reporting.

    Presently, GAAP has complex, detailed, and disparate revenue recognition requirements for specific transactions and industries including, for example, software and real estate. As a result, different industries use different accounting for economically similar transactions.

    The objective of the new guidance is to establish the principles to report useful information to users of financial statements about the nature, timing, and uncertainty of revenue from contracts with customers. The new guidance:
    • Removes inconsistencies and weaknesses in existing revenue requirements
    • Provides a more robust framework for addressing revenue issues
    • Improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets
    • Provides more useful information to users of financial statements through improved disclosure requirements, and
    • Simplifies the preparation of financial statements by reducing the number of requirements to which an organization must refer.
    I do give MS credit for taking every opportunity to market Windows 10 though.

    Revenue, accounting, annual reports and FASB are quite dull reads
      My ComputerSystem Spec


  4. Posts : 92
    64-bit 10240 10 Pro
       27 Jun 2015 #4

    This is an accounting practice that will probably lower MS's corporate tax.
      My ComputerSystem Spec

  5.    28 Jun 2015 #5

    Gary said: View Post
    This is an accounting practice that will probably lower MS's corporate tax.
    The accounting practice will probably include writing off the cost of free licenses that MS will give away for previous versions of their OS as business expenses. Spreading this cost over three years as promotion expenses will offset the income from actual license purchases to lower taxes.

    Windows 10 licenses sold as "service" also opens the door for leasing the OS in the Office 365 framework. That's not to say that it'll happen soon, but the door is open...
      My ComputerSystem Spec


  6. Posts : 14,928
    Microsoft Windows 10 Pro 64-bit 14393, Windows 10 Insider Fast Ring, Windows 8.1 Update, Ubuntu
       28 Jun 2015 #6

    Cr00zng said: View Post
    Windows 10 licenses sold as "service" also opens the door for leasing the OS in the Office 365 framework. That's not to say that it'll happen soon, but the door is open...
    Not that Dead Horse all over again!!!Click image for larger version. 

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      My ComputersSystem Spec


  7. Posts : 14,928
    Microsoft Windows 10 Pro 64-bit 14393, Windows 10 Insider Fast Ring, Windows 8.1 Update, Ubuntu
       28 Jun 2015 #7

    Here is a way of looking at Windows as a Service(WaaS)--- You want the newest smart phone but can#t afford it to buy out right, so you go to a carrier and sign a two year contract. Now, there are one of two types. 1
    1. You signup for a phone and after 2 years, if you want the newest phone, you have to sign a new 2 year contract(Old Windows version model)

    2. You signup for a phone and after 2 years, if you want the newest phone, you trade the old one for a newer , and stay on the contract you have(WaaSb where Windows new features and technology(for your specific version of course) are added without having to buy a new OS or key).
      My ComputersSystem Spec

  8.    28 Jun 2015 #8

    Cliff S said: View Post
    Here is a way of looking at Windows as a Service(WaaS)--- You want the newest smart phone but can#t afford it to buy out right, so you go to a carrier and sign a two year contract. Now, there are one of two types. 1
    1. You signup for a phone and after 2 years, if you want the newest phone, you have to sign a new 2 year contract(Old Windows version model)

    2. You signup for a phone and after 2 years, if you want the newest phone, you trade the old one for a newer , and stay on the contract you have(WaaSb where Windows new features and technology(for your specific version of course) are added without having to buy a new OS or key).
    The makes sense, except:

    Instead, Microsoft will give away Windows licenses for use on phones and tablets with screen sizes below 9 inches, OS head Terry Myerson announced. You read that right: Manufacturers will no longer have to pay for Windows Phone licenses or licenses for the small-screen Windows tablets that Microsoft's been pushing in recent months.
    Source

    It seems that the Waas is squarely aimed at Windows 10 desktop platform...
      My ComputerSystem Spec

  9.    28 Jun 2015 #9

    Cr00zng said: View Post
    The makes sense, except:



    Source

    It seems that the Waas is squarely aimed at Windows 10 desktop platform...
    That article is from: April 2014. It's not correct.
    Jeff
      My ComputerSystem Spec

  10.    28 Jun 2015 #10

    Cliff S said: View Post
    Here is a way of looking at Windows as a Service(WaaS)--- You want the newest smart phone but can#t afford it to buy out right, so you go to a carrier and sign a two year contract. Now, there are one of two types. 1
    1. You signup for a phone and after 2 years, if you want the newest phone, you have to sign a new 2 year contract(Old Windows version model)

    2. You signup for a phone and after 2 years, if you want the newest phone, you trade the old one for a newer , and stay on the contract you have(WaaSb where Windows new features and technology(for your specific version of course) are added without having to buy a new OS or key).
    Just being curious. Who offers that phone plan?
      My ComputerSystem Spec


 
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Read more: http://www.zdnet.com/article/microsoft-offers-it-guidance-to-prepare-for-windows-as-a-service/
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