[المحاسب المتميز]

Hello all, new member here.

I'm looking into investment on a company, but some of the financial statements are confusing me and my accounting knowledge is a bit rusty.

The company sells a piece of software which allows the user free use of it over one year.

The customer can renew after the one year is over for one year or get better pricing for 3 years.

According to the company, "Revenue is reconized from sales of the product over the license period associated with the initial 12 month license period. The revenue associated with a license for additional years is deferred and recognized ratably over the extended license period."

Additionaly it is stated that "Revenue from sales of hardware and the company's proprietary software meeting the criteria for recognition upon shipment are recognized at the time of shipment to customers"

On the income statement, the company books "Sales of Units" and "License Renewals" as two separate line items.

On the balance sheet, under liabilities there are deferred revenues (current) and then deferred revenue (net of Current Portfion).

How do i interpret all of this?

If the company sells 100 units in one quarter, am I to assume that only 25% is accounted for in Sales? And then the rest goes into deferred revenues? What happens to the deferred revenue once it is earned? Does it move to the income statement under sales?
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