Deferred Revenue (Non-Current) is the portion of advance payments received from customers for products or services that will be delivered or performed after one year. Until the related performance obligations are satisfied, these payments are recorded as a long-term liability.
Why is Deferred Revenue (Non-Current) Important?
Tracking Non-Current Deferred Revenue is important because it:
Highlights Long-Term Commitments: Shows future obligations extending beyond the current operating cycle.
Separates Short- and Long-Term Liabilities: Aids in assessing liquidity by distinguishing obligations due within a year from those due later.
Signals Business Model Stability: Recurring long-term deferred revenue often indicates subscription-based or multi-year contract revenue streams.
How is Deferred Revenue (Non-Current) Calculated?
On the balance sheet, Deferred Revenue (Non-Current) is reported as the difference between total advances received and the amount recognized as revenue within one year:
Non-Current Deferred Revenue = Total Advance Payments Received − Revenue Recognized in Next 12 Months − Current Deferred Revenue
Where:
Total Advance Payments Received are all customer prepayments for future delivery.
Current Deferred Revenue is the portion expected to be recognized within the next twelve months.
Additional Considerations
Revenue Recognition Standards: Under IFRS 15 / ASC 606, companies allocate contract consideration to performance obligations and recognize revenue as obligations are met, splitting deferred revenue between current and non-current portions.
Contract Duration: Long-term contracts may require periodic reassessment of the estimated timing of revenue recognition.
Disclosure Requirements: Financial statement notes should reconcile opening and closing balances of non-current deferred revenue and describe significant contract terms influencing timing.