Revenue Recognition Policy
The Company recognizes revenue in accordance with FASB ASC 605-15, (SAB 104, Revenue Recognition in Financial Statements) which requires that four basic criteria must be met before revenues can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured.
The Companys revenues are generated by selling: (1) subscription-based, real-time decision and solution information; (2) professional services; and (3) annual maintenance contracts for PASSUR® Radar Systems.
Revenues generated from subscription and maintenance agreements are recognized over the term of such executed agreements and/or customers receipt of such data or services. In accordance with ASC 605-15, we recognize revenue when persuasive evidence of an arrangement exists which is evidenced by a signed agreement, the service has been deployed, as applicable, to its hosted servers, the fee is fixed and determinable, and collection of the resulting receivable is reasonably assured. The Company records revenues pursuant to individual contracts on a month-by-month basis, as outlined by the applicable agreement. In many cases, the Company may invoice respective customers in advance of the specified period, either quarterly or annually, which coincides with the terms of the agreement. In such cases, the Company will defer at the close of each month and/or reporting period, any subscription or maintenance revenues invoiced for which services have yet to be rendered, in accordance with ASC 605-15. Revenues generated by professional services are recognized over the term of such executed agreements or as provided.
From time to time, the Company will enter into an agreement with a customer to receive a one-time fee for rights including, but not limited to, the rights to use certain data at an agreed upon location(s) for a specific use and/or for an unlimited number of users. These fees are recognized as revenue ratably over the term of the agreement or expected useful life of such arrangement, whichever is longer, but typically five years.
Deferred revenue is classified on the Companys balance sheet as a liability until such time as revenue from services is properly recognized as revenue in accordance with ASC 605-15 and the corresponding agreement.