Deferred Revenue Non Current, also known as unearned revenue, represents the money that a company receives for goods or services that it has yet to deliver or perform. It is classified as non current because the company expects to fulfill its obligation beyond the next year or operating cycle.
In more detail, Deferred Revenue Non Current is an accounting principle where a company receives payment in advance for goods or services that will be delivered or performed in the future. This is reported as a liability on the company’s balance sheet because it represents an obligation that the company must fulfill in the future.
Companies often receive payments in advance for various reasons such as subscription-based services, long-term contracts, or pre-orders. Until the goods have been delivered, or the services have been performed, these payments are not considered earned revenue.
Deferred Revenue Non Current is different from Deferred Revenue Current, which represents advance payments that a company expects to earn within one year or one operating cycle. The distinction between these two reflects the company's expectation of when the obligation will be met.
Adobe, a software company, often receives payments for annual subscriptions to its software. Since the service (access to the software) will be provided over a year, the payment is initially recorded as Deferred Revenue Non Current. As the service is provided over the year, the amount is gradually recognized as revenue.
Delta Air Lines often sells tickets for flights that will occur in the future. These payments are initially recorded as Deferred Revenue Non Current. As the flights occur and the service is provided, the amount is recognized as revenue.
Bechtel Corporation, a construction company, often receives advance payments for long-term construction projects. These payments are recorded as Deferred Revenue Non Current. As the construction progresses and milestones are met, portions of the payment are recognized as revenue.