Tuesday, June 18, 2019
Popping the Lid on Smuckers’ Goodwill

Tuesday, June 11, 2019
Not Much Fizz in LaCroix Right Now

Wednesday, May 29, 2019
An Example of Calcbench, Excel, and Insight

Monday, May 20, 2019
Research Paper: Capex Spending

Thursday, May 16, 2019
Psst: Got Any Weed?

Wednesday, May 15, 2019
Open Letter: SEC Proposed Rule for BDCs

Friday, May 10, 2019
General Motors and Workhorse

Monday, May 6, 2019
How to Find Earnings Release Data

Tuesday, April 23, 2019
Following Restructuring Costs Over Time

Monday, April 22, 2019
Capex Spending: More Than You Might Think

Saturday, April 13, 2019
When AWS Takes Over the World

Thursday, April 11, 2019
Data Trends in Focus: Restructuring Costs

Sunday, April 7, 2019
How One Customer Crushed It With Calcbench

Thursday, April 4, 2019
TJX Shows Complexity of Leasing Costs Reporting

Tuesday, April 2, 2019
CEO Pay Ratios: Some 2018 Thoughts

Wednesday, March 27, 2019
Corporate Spending: Where It Goes, 2017 vs. 2018

Monday, March 25, 2019
Health Insurers: A Bit Winded?

Friday, March 22, 2019
Our New Master Class Video

Thursday, March 21, 2019
Tech Data’s Goodwill Adjustment

Tuesday, March 19, 2019
There’s Taxes, and There’s Taxes

Archive  |  Search:
Deferred Revenue: Steady As It Goes
Sunday, July 10, 2016

Every company has a certain rhythm to its revenue cycle, but during one recent expedition into the Calcbench databases we were struck by patterns of deferred revenue—and how steady those numbers have been as a portion of corporate revenue overall.

Deferred revenue is revenue that will hit a company’s coffers sometime in the future, but not within the period of the company’s current financial filing. For example, a software company might sign a customer to a $100 million services agreement: $20 million to install the software today, plus $20 million at the end of each year for the next four years.

The $20 million installation payment counts as immediate revenue. The other $80 million is deferred revenue, which cannot be recognized until the software company fulfills each year of the contract. So the next $20 million is current deferred revenue, because it is due within 12 months; the remaining $60 million is non-current deferred revenue due in the following three years.

A spike in deferred revenue could mean a company is shifting its basic strategy, perhaps from delivering physical goods to performing long-term services. It could also be an omen of temporary cash crunches, if the business has regular fixed costs but revenue can’t be recognized until terms of the contract are fulfilled far in the future.

Well, we went looking at deferred revenue as a portion of total revenue for all corporate filers, for the last five years. Taken as a whole, spikes are hard to find. Consider this chart:

Avg Revenue per Filer Avg Deferred Revenue per Filer Pct. of Filers With Deferred Rev Deferred Rev as Pct. of Total
2015 $2,739,422,144 $181,322,570 29.9% 6.62%
2014 $2,562,254,976 $163,499,056 30.0% 6.38%
2013 $2,315,176,223 $152,460,866 28.9% 6.59%
2012 $2,197,653,145 $151,285,186 28.0% 6.88%
2011 $2,080,884,336 $134,472,919 27.5% 6.46%

So deferred revenue is becoming a slightly larger portion of all revenue. That’s partly because the percentage of filers reporting deferred revenue is up, and partly because the amount of deferred revenue itself is larger—but you can’t call a rise from 6.46 percent in 2011 to 6.62 percent in 2015 a “spike,” per se.

That’s one look at deferred revenue for corporate filers in total. How does the picture look for the S&P 500? Specific numbers are different, but the trend is essentially the same:

Avg Revenue per Filer Avg Deferred Revenue per Filer Pct. of Filers With Deferred Rev Deferred Rev as Pct. of Total
2015 $20,989,977,863 $1,625,615,588 25.2% 7.74%
2014 $21,592,289,139 $1,668,640,315 25.5% 7.73%
2013 $20,738,170,675 $1,638,910,960 25.2% 7.90%
2012 $20,113,637,962 $1,485,976,585 25.1% 8.12%
2011 $19,547,140,902 $1,485,976,585 25.0% 7.60%

You can’t call that a spike either.

Over the long term, one crucial question will be how companies apply the impending new revenue recognition standard to deferred revenue. That standard redefines business deals as a series of performance obligations—and you can only recognize the revenue from a deal in phases, as each performance obligation is fulfilled.

For services-oriented businesses, translating business contracts into a series of performance obligations may be tricky. The Financial Accounting Standards Board and audit firms have killed billions of electrons pounding out guidance on how to implement the new standard, and they’ll continue to do so for years to come.

The good news: the standard isn’t effective until 2018. The bad news: corporations have a long history of dragging their feet on implementing new reporting standards—one might call it “deferred planning”—and then panicking at the 11th hour. We’ll see if that pattern holds steady in years to come, too.

FREE Calcbench Premium
Two Week Trial

Research Financial & Accounting Data Like Never Before. More features and try our Excel add-in. Sign up now to try the Premium Suite.