FASB 606 that governs revenue recognition is changing. The article below notes that it should have less effect on SaaS companies than companies where their software is installed on computers, such as Microsoft’s Windows. Something to keep an eye on for investors.
Companies like Microsoft will be recognizing more revenue earlier in the process that could cause more volatility in revenue and earnings. The metric that won’t change; however, is cash flow. Investors may be eyeing this metric more closely as the new rules are implemented.
Here’s the link to the IBD article for those interested.