Thread by @patio11

Expect to hear more from me about this topic in the future but for the moment "Hallelujah, there's about 10k lines of code I'll never ever have to write again."

stripe.com/revenue-recogn…

I always ran my businesses on a cash basis rather than an accrual basis, because I wasn't intending on taking investment for them, didn't intend to sell, and didn't want the extra complexity.

Then I sold them.

Do you know how fun doing *retroactive* accrual books is?

(The acquirer wants to value your company based on how much money it has earned over the last 12 months, but a user pre-paying for 12 months 3 months ago shouldn't matter as much as you having 4 customers sign up for month-to-month.

Plus, COGS in future.)

"This sounds like a simple thing to fix in Excel."

Ahh, yes, I remember being young and innocent, too.

In addition to it being distinctly unfun, it hit when there was an unending list of prospectus drafting/handover tasks/etc.

Also some uncertainty about whether I got it right

As long as I'm here, fun story:

Did you know that, far afield from SaaS businesses, our friends in video games have interesting revenue recognition problems and that literally tens of thousands of hours of accountant brainsweat have gone into them?

You would think "How hard is it? When you sell a software license for money and they immediately get the software that is recognized immediately. And sure a WoW subscription is recognized ratably over time like SaaS."

Now comes the fun bit: if I purchase a company's non-free currency (call them Dragon Eggs) and exchange 3 dragon eggs for a potion of 24 hour boosted XP and 5 dragon eggs for a sword, what happens?

"You recognize the revenue immediately for the non-refundable sale of dragon eggs, duh."

Yeah that is what every technologist including me thinks should happen. But the accountants disagree.

The dragon eggs are immediately deferred revenue.

The potion you recognize over 24 hours assuming the game consumes it immediately.

The sword, though... swords are tricky. (I swear Internets this is an actual thing.)

If you *can show your accountants data on the useful life of swords* you recognize the revenue ratably over the lifetime of the sword.

If you can't, they'll allow you to recognize the revenue ratably over the *future estimated duration of the customer relationship.*

That second one is less favorable (generally speaking) and so there are design decisions made in some games to a) consume swords more quickly and b) track the actual life of swords in Oracle and otherwise have a paper trail that Dangerous Professionals can rely upon.

True statement, and you very well have expensive meeting w/ Big Four auditor about sampled transactions and say "OK moving on to IPwnN00bs420's purchase of the Sword Of Dusk, as you can see it from our internal interface it was part of a bundle..."

https://twitter.com/kbaxter/status/1440501424593399809?s=20

"I refuse to believe that grown adults have spend tens of thousands of hours on this topic."

I refer to to PWC (the document is in English despite the URL; couldn't instantly find it on US site):

pwc.es/es/publicacion…

"What's a design decision made in games to consume swords more quickly?"

So you know how in e.g. Genshin Impact you can sacrifice copies of a particular weapon to power up the surviving copy of the weapon, a mechanic common to many gatcha games?

Well now you know why!

"Ahh yes the great weapon durability plague unleashed by IFRS 15. It's eaten more swords than all the rust monsters in all the prime material planes combined."