"We offset deferred revenue with the associated accounts receivable obligations in connection with our sales of licenses and first year PCS for any contracts which required deferral as of the end of a reporting period under SOP 97-2."
Quest netted the def rev against the associated A/R and did not show them on the balance sheet, then provided the guidance they used in determining that presentation:
"We have also reviewed interpretive guidance published by additional Big Four accounting firms indicating that advance billings should be presented on a net basis, such that no amounts are recorded on the balance sheet."
I don't believe deferred revenue is permitted here under GAAP. Deferred Revenue is considerations (usually money) received for goods or services to be provided in the future under contractual obligations.
They have no contractual obligations with the parties from which they are claiming accounts receivable. They say those other companies used their songs without licensing agreements, so they made up a figure and claimed they were owed that. Since it doesn't meet the GAAP definition of Revenue, they made up their own Non-GAAP definition of deferred revenue and called their fantasy amounts owed that.
They haven't received any money, nor do they have contractual agreements with the parties they claim are responsible for these amounts. Both amounts are complete BS.and not GAAP compliant
I suggest you read their crappy Notes to the Financial Statements. Again, not GAAP compliant. They are making up their own rules.
Revenue Recognition The Company recognizes revenue when persuasive evidence of an arrangement exists, control has been transferred, the fee is fixed or determinable, and collectability is reasonably assured. In instances where final acceptance of the product Is specified by the customer, revenue is deferred until all acceptance criteria have been met. The Company’s primary source of revenue is the monthly licensing subscription fee. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its arrangements: ? Identify the contract with a customer, ? Identify the performance obligations in the contract, ? Determine the transaction price, ? Allocate the transaction price to performance obligations in the contract, and ? Recognize revenue as the performance obligation is satisfied.
Deferred Revenue The company recognizes deferred revenue to account for all revenue streams of the Company that doesn’t meet the revenue recognition criteria.
That is NOT the GAAP definition of Deferred Revenue. They just made it up.
Since they went "Alternative Reporting", they are making up their own non-GAAP compliant accounting rules and using those fake amounts to pump the stock.
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