What is the relationship here? “Since deferred revenue increased in 2009, it decreased EBIT”. Sounds counterintuitive.
If deferred revenue position increased in BS, this means that revenues has not be recognized in current period and are not contained in current year EBIT. This is conservative approach opposite to pumping results in the current year (eg. deferred expenses and expense capitalization and recognizing revenues before exactly ocurred).
Also by increasing deferred revenues in BS, tax base is lower and CF is higher due to payments collection before revenue recognition.
Good, thanks. I thought this has a bearing on operating expenses as well (increase expenses) thus reducing EBIT, that’s why confused me.
I thought there would be more “deferred stuff” in L2 in comparison to L1.