I don't agree with your interpretation. When a customer signs initially , he is not agreeing to become a customer of Big, its an application for finance only and it is contingent entirely upon accepting the video - pg 4 of 43 page response - highlighted below. So no obligation has been agreed to by the customer at that point in time, so it is not deferred revenue, it is that simple ........the right to future revenue is still contingent upon something happening, so there is no deferred revenue to recognize until that acceptance happens, therefore the accounting entry taking it straight to deferred revenue immediately , whether its technically a liability account or not is still wrong because it not reflecting both the legal or economic essence of what has so far transpired.
The entry should be dr bank, credit liability , and then once a customer accepts the video, deferred revenue can be recognized in exchange for that liability (because their is an obligation both on the customer to pay for the product at that point and for big to supply it) . ie dr liability, cr deferred revenue - swapping in the deferred revenue at the appropriate point in time when a future obligation on both parties has truly been created.
By adopting their treatment they are recognizing something as potential revenue before it is and overstating their net financial assets on the balance sheet because often analysts don't net off deferred revenue with cash because deferred revenue is considered a mere timing entry, actual cash liabilities are usually netted off as they give a truer position of balance sheet strength.
In strict contract law terms BIG has been paid by a third party before a contract even exists, it has been paid on a mere invitation to treat, in that sense until that changes , its liability is to repay that person who has advanced it those funds ie Finstro...........until those funds can be aligned to a contract that comes into existence with the customer at the true time of acceptance.
Deferred revenue is a common thing in construction and building contracts but whenever it is used a contract that sets out the right to receive future monies is already in place without question. There is now way BIG on any reasonable construction of their own response, can argue a contract is already in place at the moment the customer signs the application letter as by their own acknowledgement they haven't accepted any obligation as yet.
With the treatment they are adopting it is easily possible to create a false impression about future revenues coming down the pipe and it is on these impressions that technology companies trade , particularly ones losing money , so this treatment has to be correct . I am a fan of Big and invested and I hope they can get over this and make the company work however their accounting treatment is total horseshit.........and Asic and the Asx need to call them on it because it has the capability of providing misleading figures to the market.
And the argument that they can find someone else to swap in is all baloney too.........only when they actually find a customer who accepts, they should book deferred revenue and start amortising that off to the P&L not before hand.
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