Deferred Revenue

Filed Under » , , , ,
Dictionary Says

Definition of 'Deferred Revenue'

Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been rendered or products have been delivered. Deferred revenue is a liability because it refers to revenue that has not yet been earned, but represents products or services that are owed to the customer. As the product or service is delivered over time, it is recognized as revenue on the income statement.



Investopedia Says

Investopedia explains 'Deferred Revenue'

For example, a company that receives an advance payment of $100,000 for delivery of a product would book it as deferred revenue on its balance sheet. Once it delivers the product to the customer, the company would transfer the $100,000 from the deferred revenue account to regular revenue on its income statement.

Software companies generally have sizable amounts of deferred revenues on their balance sheets, typically representing license fees and annual maintenance charges. Analysts study trends in deferred revenues of such companies for a better indication of their financial performance.

Recording unearned revenues on the income statement, rather than as deferred revenues on the balance sheet, may be considered as aggressive accounting, as it would have the effect of overstating revenues.

Articles Of Interest

  1.

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.

  2. Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.

  3. Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.

  4. Weighted Average Cost Of Capital (WACC)

    Weighted average cost of capital may be hard to calculate, but it's a solid way to measure investment quality

  5. Understanding And Playing The Dow Jones Industrial Average

    Learn strategies for investing in this price-weighted index and how to interpret its movements.

  6. Seadrill Still In Motion, But Delivering Better Utilization And Dividends

    Still an aggressively-run company, Seadrill offers highly leveraged exposure to the growing offshore drilling market.

  7. AstraZeneca Looks To Fish Oil To Round Out Its Cardio Portfolio

    AstraZeneca validates the purified fish oil concept, but not at an especially high price.

  8. Cost Discipline Driving The Story At PNC Financial

    If PNC can execute on it cost-cutting initiatves, the value creation could be meaningful

  9. Guide to Pairs Trading

    Pairs traders wait for weakness in the correlation, and then go long on the under-performer while simultaneously going short on the over-performer, closing the positions as the relationship returns ...

  10. A Day In The Life Of A Public Accountant

    Here's an inside look at the workdays of two experienced CPAs, to give you an idea of what it might be like to pursue a career as a public accountant.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Yield Elbow

    The point on the yield curve indicating the year in which the economy's highest interest rates occur. The yield elbow is the peak of the yield curve, signifying where the highest interest rates occurred.

  2. Xenocurrency

    A currency that trades in markets outside of its domestic borders.

  3. Wanton Disregard

    A standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly.

  4. Ultra ETF

    A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark.

  5. Toehold Purchase

    A purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making.

  6. Samurai Bond

    A yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.
Trading Center
http://sp.fastclick.net/ad/tr/10858-64082-15546-0?mpt=aed96db665717d2f065c1e7b38c2b4cb