What is deferred revenue?
Deferred revenue is money a company has billed or received for goods or services it has not yet delivered. US accounting rules (GAAP) call it a contract liability: the company still owes the customer the work.[S1]
Companies may use another name; Microsoft says "unearned revenue".[S1][S3]
How is deferred revenue worked out?
It is a balance that moves both ways. Advance billings add to it, and revenue earned from it takes it down.[S3]
Closing balance = opening balance + amounts billed in advance − revenue recognized from the balance
Microsoft's unearned revenue note shows this.[S3]
Microsoft says its remaining performance obligations (RPO) include unearned revenue plus amounts it will bill later.[S3] Its RPO was $683.0B (Sep 30, 2026).
Where do you find it in a 10-K or 10-Q?
It sits on the balance sheet, among the liabilities.[S2] ServiceNow splits it into "Current portion of deferred revenue" and "Deferred revenue, less current portion".[S4]
The balance sheet is in Item 8 of a 10-K[S5] and Part I, Item 1 of a 10-Q.[S6] GAAP requires its opening and closing balances to be disclosed.[S1]
What does deferred revenue leave out?
- Signed amounts not yet billed. Microsoft generally bills multi-year deals once a year, at the start of each year. Later years are not yet in the balance.[S3] RPO counts them. See remaining performance obligations.
- Work done before billing. Revenue earned before the company can bill is a contract asset, not deferred revenue.[S1]
- Whether the cash has come in. A billed amount counts once payment is due, even before the customer pays.[S1] The change in the balance shows up in operating cash flow.[S4] See free cash flow.