The Slings and Arrows of Deferred Prorated Feature Revenue

Oh! Curses! I have been suffering the slings and arrows of deferred prorated feature revenue!

When I say these things at work, people look at me like I'm out of my mind. So I say them in my head and then write them in my blog, as you already know I'm out of my mind.

Accounting, despite the hype, is not a fascinating and glorious career path. Steady paycheck? Yes. Wild and exciting adventures, not so much. Thank God I have a fabulous imagination.

For those of you who would like a better understanding of the sort of thing I do at work, I'm about to enlighten you! For those of you who could care less, stop reading now and just wait for my next post.

I'm not going to make you do all of the mental gymnastics, so I'm going to sum up what I do, and then give you the detailed version, which is where the real headache lies. In the cell phone world our revenue goes up or down based on two main things: an increase or decrease in our subscriber base, or an increase or decrease in how much they spend (e.g. the cost of their rate plan).

This is not rocket science. I have all of these nice tables with formulas and percentages and ratios and I look at it and go, yup, that makes sense. And then I have to put it into words. Do you remember word problems in 4th grade math? Sally has seven apples and Dan has nine apples. Tony likes toy cars. How many apples would Tony need so everyone has 14 apples? Who the hell cares? But did you notice I put in that tricky bit about the toy cars which has nothing to do with the problem? Do you remember how your teachers would do that to you, too? Ok, what I do is sort of like that, but backwards. I've got the answer, and I need to put the words together. And I've got to figure out which of my metrics actually apply to the answer and which are perhaps interesting, but not necessarily useful.

I'm going to take a moment and pat myself on the back: 4th grade math wasn't that complicated for me. In fact, math wasn't that complicated for me. I could figure out that problem regardless of which order those three sentences were in. Apparently our auditors had a little less success with word problems, because suddenly it matters what order those sentences are in.

Today's lesson: increase or decrease in deferred prorated feature revenue. Because no one who reads this blog cares what a prorated feature is, and the last time I tried to explain the deferred bit I failed miserably, I'm just going to say that my job is to explain the increase or decrease in revenue. And just for clarification purposes, I am TOTALLY making up these numbers, and I'm putting them in 2011. I'm not making any predictions. This is not a forecast, so don't go making any financial planning decisions based on this blog entry. This is just an example!

Here is what it looks like to me: revenue increased $900k. Or 17%. Subscribers increased 19% Or by 42K. Average revenue per subscriber decreased 2% or $1.12.

This means that revenue went up a bunch. Because subscribers increased more than the decrease in what they spent. I can do that math in my head: +17%=+19%-2%. This is what it looks like on my official reports:

Revenue increased by 17%, or $900K, from $5.29M in Jul-11 to $6.19M in Aug-11. At the same time, subscribers increased by 19%, or 42K, from 221K in Jul-11 to 263K in Aug-11. The difference between the change in revenue and the change in subscribers is explained by the 2%, or $1.12, decrease in average revenue per subscriber from $56.00 in Jul-11 to $54.88 in Aug-11. During this time period, 6% more revenue was deferred to future and future+1 time periods than was recognized in the current period.

Right, because that clears everything up.