Cisco Systems Inc. (CSCO)
Analysis of Revenues
High level of difficulty
Accounting Policy on Revenue Recognition
Cisco enters into contracts with customers that can include various combinations of products and services which are generally distinct and accounted for as separate performance obligations. As a result, Cisco’s contracts may contain multiple performance obligations. Cisco determines whether arrangements are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are readily available and whether the commitment to transfer the product or service to the customer is separately identifiable from other obligations in the contract. Cisco classifies the hardware, perpetual software licenses, and software-as-a-service (SaaS) as distinct performance obligations. Term software licenses represent multiple obligations, which include software licenses and software maintenance. In transactions where Cisco delivers hardware or software, Cisco is typically the principal and Cisco records revenue and costs of goods sold on a gross basis. Cisco refers to the term software licenses, security software licenses, SaaS, and associated service arrangements as subscription offers.
Cisco recognizes revenue upon transfer of control of promised goods or services in a contract with a customer in an amount that reflects the consideration Cisco expects to receive in exchange for those products or services. Transfer of control occurs once the customer has the contractual right to use the product, generally upon shipment or once title and risk of loss has transferred to the customer. Transfer of control can also occur over time for software maintenance and services as the customer receives the benefit over the contract term. Cisco’s hardware and perpetual software licenses are distinct performance obligations where revenue is recognized upfront upon transfer of control. Term software licenses include multiple performance obligations where the term licenses are recognized upfront upon transfer of control, with the associated software maintenance revenue recognized ratably over the contract term as services and software updates are provided. SaaS arrangements do not include the right for the customer to take possession of the software during the term, and therefore have one distinct performance obligation which is satisfied over time with revenue recognized ratably over the contract term as the customer consumes the services. On the product sales, Cisco records consideration from shipping and handling on a gross basis within net product sales. Cisco records the revenue net of any associated sales taxes.
Source: 10-K (filing date: 2019-09-05).
Revenues as Reported
Cisco Systems Inc., Income Statement, Revenues
US$ in millions
|12 months ended||Jul 27, 2019||Jul 28, 2018||Jul 29, 2017||Jul 30, 2016||Jul 25, 2015||Jul 26, 2014|
Based on: 10-K (filing date: 2019-09-05), 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09).
|Revenue||Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).||Cisco Systems Inc.’s revenue increased from 2017 to 2018 and from 2018 to 2019.|