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Originally posted by 5hareholder
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When you sell a subscription to someone, you generally get an upfront payment of all/some of the subscription period. Until you go through that subscription, that revenue is effectively "unearned" as you have not yet transferred the full product/service that you have been paid to deliver. This becomes a liability on your balance sheet until you deliver the full serivce. The ruling changes the amount of revenue that remains "unearned", and is favourable for JCS because it allows the unearned revenue and deferred expenditure to be claimed earlier in the subscription period. As the company is cashflow positive, and revenue is higher than expenditure, this will be seen as an increase in net assets (as there is less of an unearned revenue liability on the balance sheet).
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Many thanks for the response 5H. I'm still not really understanding why it allows the unearned income to be earned earlier. From my quick search its now more about the change from transfer of revenue risk and reward to transfer of ownership. Can you put this into a JCS context by any chance?
