Vox Rationalis

Cash Analysis: Wal-Mart, Lilly, Verizon Not Quite So Rich

Alan Brochstein wrote:

> Deferred revenue means that the company collects cash but hasn't
> booked the sale... The presence of a large amount of
> deferred revenue vs cash tells me that the cash won't go up in the
> future, al lthings equal (unless they grow deferred revenue).

True. But your point in the article was not just that these things indicate cash will not go up, but that cash could go down: "...non-debt liabilities that can act as claims on cash, like...deferred revenue..." does not hold in Apple's case. Where in almost all cases deferred revenue is associated with a future cost (labor or product to be delivered), most of Apple's deferred revenue is not. There is no product to be delivered, no work to be done, no order that can be canceled. There are no circumstances under which this deferred revenue will not become shareholder equity as quarters go by.

Apple is a very rare case, however.

Cash Analysis: Wal-Mart, Lilly, Verizon Not Quite So Rich

The author wrote:

"...examples of non-debt liabilities that can act as claims on cash, like deferred taxes or deferred revenue..."

Not necessarily. A large majority of Apple's deferred revenue is due to subscription accounting of iPhone and AppleTV sales. Almost always, deferred revenue is due to prepayments collected for work or product not yet delivered, but in Apple's case most of it is simply accounting mumbo-jumbo.

"...and there are asset impairments (such as AR or Inventory ) that can create a short-term claim on cash as liabilities must be met."

Well...these assets can't claim cash directly, but if they aren't converted to cash as expected, existing cash won't go as far. Also, as has been recently reinforced, asset write-offs directly affect owner's equity (capitalization), which can have other impacts on cash usage depending on the company's situation.

By the way, it's funny to see a list of "cash-rich" companies without Berkshire Hathaway, which isn't in the S&P 500.