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.
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.
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