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These excerpts taken from the INAP 10-K filed Mar 13, 2009. Revenue
Recognition. The majority of our
revenue is derived from high performance IP services, related data center
services, CDN services and other ancillary products and services throughout
the United States. We derive our IP services revenue from the sale of
high performance Internet connectivity services at fixed rates or usage-based
pricing to our customers that desire a DS-3 or faster connection. We provide
slower T-1 and fractional DS-3 connections at fixed rates. Data center
revenues include both physical space for hosting customers’ network and other
equipment plus associated services such as redundant power and network
connectivity, environmental controls and security. Data center revenue is based
on occupied space and both allocated and variable-based usage. CDN product line
revenue includes three components: (1) data storage; (2) streaming/delivery and
(3) a user interface/reporting tool. We provide the CDN service components via
internally developed and acquired technology that resides on our network. CDN
services revenues are based on either fixed rates or usage-based pricing.
All of the foregoing revenue arrangements have contractual terms and in many
instances, include minimum usage commitments and
provide the rate at which the customer must pay for actual usage above the
monthly minimum. For these services, we recognize the monthly minimum as revenue
each month provided that both parties have signed an enforceable contract, we
have delivered the service to the customer, the fee for the service is fixed or
determinable and collection is reasonably assured. If a customer’s usage of our
services exceeds the monthly minimum, we recognize revenue for such excess in
the period of the usage. We record the installation fees as deferred revenue and
recognize as revenue ratably over the estimated life of the customer
arrangement. We also derive revenue from services sold as discrete,
non-recurring events or based solely on usage. For these services, we recognize
revenue after both parties have signed an enforceable contract, the fee is fixed
or determinable, the event or usage has occurred and collection is reasonably
assured. Other ancillary products and services include our FCP product,
server management and installation, virtual private networking, managed
security,
data backup,
remote storage and restoration.
We use
contracts and sales or purchase orders as evidence of an arrangement. We test
for availability or connectivity to verify delivery of our services. We assess
whether the fee is fixed or determinable based on the payment terms associated
with the transaction and whether the sales price is subject to refund or
adjustment. Because the software component of our FCP is more than incidental to
the product as a whole, we recognize associated FCP revenue in accordance with
the American Institute of Certified Public Accountants’ Statement of Position
97-2, Software
Revenue Recognition. - 33
-
We also
enter into multiple-element arrangements or bundled services, such as combining
IP services with data center and/or CDN services. When we enter into such
arrangements, we account for each element separately over its respective service
period or at the time of delivery, provided that there is objective evidence of
fair value for the separate elements. Objective evidence of fair value includes
the price charged for the element when sold separately. If we cannot objectively
determine the fair value of each element, we recognize the total value of the
arrangement ratably over the entire service period to the extent that we have
begun to provide the services, and we have satisfied other revenue recognition
criteria.
Deferred
revenue consists of revenues for services to be delivered in the future and
consists primarily of advance billings, which we amortize over the respective
service period. We defer and amortize revenues associated with billings for
installation of customer network equipment over the estimated life of the
customer relationship, which was two to three years during the
three-year period ended December 31, 2008. We defer and amortize revenues
for installation services because the installation service is integral to our
primary service offering and does not have value to customers on a stand-alone
basis. We also defer and amortize the associated incremental direct costs. We
amortize deferred post-contract customer support associated with sales of our
FCP and similar products ratably over the contract period, which is
generally one year.
We
routinely review the collectability of our accounts receivable and payment
status of our customers. If we determine that collection of service revenue is
uncertain, we do not recognize revenue until collection is probable.
Additionally, we maintain allowances for doubtful accounts resulting from the
inability of our customers to make required payments on accounts receivable. The
allowance for doubtful accounts is based upon specific and general customer
information, which also includes estimates based on our best understanding of
the customers’ ability to pay and their payment status. Customers’ ability
to pay takes into consideration payment history, legal status (i.e., bankruptcy)
and the status of services we are providing. We assess the payment status of
customers by reference to the terms under which services or goods are provided,
with any payments not made on or before their due date considered
past-due. Once we have exhausted all collection efforts, we write the
uncollectible balance off against the allowance for doubtful
accounts.
We record
an amount for service level agreements and other sales adjustments, which
reduces net accounts receivable and revenues. Adjustments for service level
agreements are identified within the billing period and revenues are reduced
accordingly. The amount for sales adjustments is based upon
specific customer information, including outstanding promotional credits,
customer disputes, credit adjustments not yet processed through the billing
system and historical activity. If the financial condition of our customers
deteriorates, or if we become aware of new information impacting a customer's
credit risk, we may make additional adjustments.
Revenue
Recognition. The majority of our
revenue is derived from high performance IP services, related data center
services, CDN services and other ancillary products and services throughout
the United States. We derive our IP services revenue from the sale of
high performance Internet connectivity services at fixed rates or usage-based
pricing to our customers that desire a DS-3 or faster connection. We provide
slower T-1 and fractional DS-3 connections at fixed rates. Data center
revenues include both physical space for hosting customers’ network and other
equipment plus associated services such as redundant power and network
connectivity, environmental controls and security. Data center revenue is based
on occupied space and both allocated and variable-based usage. CDN product line
revenue includes three components: (1) data storage; (2) streaming/delivery and
(3) a user interface/reporting tool. We provide the CDN service components via
internally developed and acquired technology that resides on our network. CDN
services revenues are based on either fixed rates or usage-based pricing.
All of the foregoing revenue arrangements have contractual terms and in many
instances, include minimum usage commitments and
provide the rate at which the customer must pay for actual usage above the
monthly minimum. For these services, we recognize the monthly minimum as revenue
each month provided that both parties have signed an enforceable contract, we
have delivered the service to the customer, the fee for the service is fixed or
determinable and collection is reasonably assured. If a customer’s usage of our
services exceeds the monthly minimum, we recognize revenue for such excess in
the period of the usage. We record the installation fees as deferred revenue and
recognize as revenue ratably over the estimated life of the customer
arrangement. We also derive revenue from services sold as discrete,
non-recurring events or based solely on usage. For these services, we recognize
revenue after both parties have signed an enforceable contract, the fee is fixed
or determinable, the event or usage has occurred and collection is reasonably
assured. Other ancillary products and services include our FCP product,
server management and installation, virtual private networking, managed
security,
data backup,
remote storage and restoration.
We use
contracts and sales or purchase orders as evidence of an arrangement. We test
for availability or connectivity to verify delivery of our services. We assess
whether the fee is fixed or determinable based on the payment terms associated
with the transaction and whether the sales price is subject to refund or
adjustment. Because the software component of our FCP is more than incidental to
the product as a whole, we recognize associated FCP revenue in accordance with
the American Institute of Certified Public Accountants’ Statement of Position
97-2, Software
Revenue Recognition. - 33
-
We also
enter into multiple-element arrangements or bundled services, such as combining
IP services with data center and/or CDN services. When we enter into such
arrangements, we account for each element separately over its respective service
period or at the time of delivery, provided that there is objective evidence of
fair value for the separate elements. Objective evidence of fair value includes
the price charged for the element when sold separately. If we cannot objectively
determine the fair value of each element, we recognize the total value of the
arrangement ratably over the entire service period to the extent that we have
begun to provide the services, and we have satisfied other revenue recognition
criteria.
Deferred
revenue consists of revenues for services to be delivered in the future and
consists primarily of advance billings, which we amortize over the respective
service period. We defer and amortize revenues associated with billings for
installation of customer network equipment over the estimated life of the
customer relationship, which was two to three years during the
three-year period ended December 31, 2008. We defer and amortize revenues
for installation services because the installation service is integral to our
primary service offering and does not have value to customers on a stand-alone
basis. We also defer and amortize the associated incremental direct costs. We
amortize deferred post-contract customer support associated with sales of our
FCP and similar products ratably over the contract period, which is
generally one year.
We
routinely review the collectability of our accounts receivable and payment
status of our customers. If we determine that collection of service revenue is
uncertain, we do not recognize revenue until collection is probable.
Additionally, we maintain allowances for doubtful accounts resulting from the
inability of our customers to make required payments on accounts receivable. The
allowance for doubtful accounts is based upon specific and general customer
information, which also includes estimates based on our best understanding of
the customers’ ability to pay and their payment status. Customers’ ability
to pay takes into consideration payment history, legal status (i.e., bankruptcy)
and the status of services we are providing. We assess the payment status of
customers by reference to the terms under which services or goods are provided,
with any payments not made on or before their due date considered
past-due. Once we have exhausted all collection efforts, we write the
uncollectible balance off against the allowance for doubtful
accounts.
We record
an amount for service level agreements and other sales adjustments, which
reduces net accounts receivable and revenues. Adjustments for service level
agreements are identified within the billing period and revenues are reduced
accordingly. The amount for sales adjustments is based upon
specific customer information, including outstanding promotional credits,
customer disputes, credit adjustments not yet processed through the billing
system and historical activity. If the financial condition of our customers
deteriorates, or if we become aware of new information impacting a customer's
credit risk, we may make additional adjustments.
Revenue
Recognition. The majority of our
revenue is derived from high performance IP services, related data center
services, CDN services and other ancillary products and services throughout
the United States. We derive our IP services revenue from the sale of
high performance Internet connectivity services at fixed rates or usage-based
pricing to our customers that desire a DS-3 or faster connection. We provide
slower T-1 and fractional DS-3 connections at fixed rates. Data center
revenues include both physical space for hosting customers’ network and other
equipment plus associated services such as redundant power and network
connectivity, environmental controls and security. Data center revenue is based
on occupied space and both allocated and variable-based usage. CDN product line
revenue includes three components: (1) data storage; (2) streaming/delivery and
(3) a user interface/reporting tool. We provide the CDN service components via
internally developed and acquired technology that resides on our network. CDN
services revenues are based on either fixed rates or usage-based pricing.
All of the foregoing revenue arrangements have contractual terms and in many
instances, include minimum usage commitments and
provide the rate at which the customer must pay for actual usage above the
monthly minimum. For these services, we recognize the monthly minimum as revenue
each month provided that both parties have signed an enforceable contract, we
have delivered the service to the customer, the fee for the service is fixed or
determinable and collection is reasonably assured. If a customer’s usage of our
services exceeds the monthly minimum, we recognize revenue for such excess in
the period of the usage. We record the installation fees as deferred revenue and
recognize as revenue ratably over the estimated life of the customer
arrangement. We also derive revenue from services sold as discrete,
non-recurring events or based solely on usage. For these services, we recognize
revenue after both parties have signed an enforceable contract, the fee is fixed
or determinable, the event or usage has occurred and collection is reasonably
assured. Other ancillary products and services include our FCP product,
server management and installation, virtual private networking, managed
security,
data backup,
remote storage and restoration.
We use
contracts and sales or purchase orders as evidence of an arrangement. We test
for availability or connectivity to verify delivery of our services. We assess
whether the fee is fixed or determinable based on the payment terms associated
with the transaction and whether the sales price is subject to refund or
adjustment. Because the software component of our FCP is more than incidental to
the product as a whole, we recognize associated FCP revenue in accordance with
the American Institute of Certified Public Accountants’ Statement of Position
97-2, Software
Revenue Recognition. - 33
-
We also
enter into multiple-element arrangements or bundled services, such as combining
IP services with data center and/or CDN services. When we enter into such
arrangements, we account for each element separately over its respective service
period or at the time of delivery, provided that there is objective evidence of
fair value for the separate elements. Objective evidence of fair value includes
the price charged for the element when sold separately. If we cannot objectively
determine the fair value of each element, we recognize the total value of the
arrangement ratably over the entire service period to the extent that we have
begun to provide the services, and we have satisfied other revenue recognition
criteria.
Deferred
revenue consists of revenues for services to be delivered in the future and
consists primarily of advance billings, which we amortize over the respective
service period. We defer and amortize revenues associated with billings for
installation of customer network equipment over the estimated life of the
customer relationship, which was two to three years during the
three-year period ended December 31, 2008. We defer and amortize revenues
for installation services because the installation service is integral to our
primary service offering and does not have value to customers on a stand-alone
basis. We also defer and amortize the associated incremental direct costs. We
amortize deferred post-contract customer support associated with sales of our
FCP and similar products ratably over the contract period, which is
generally one year.
We
routinely review the collectability of our accounts receivable and payment
status of our customers. If we determine that collection of service revenue is
uncertain, we do not recognize revenue until collection is probable.
Additionally, we maintain allowances for doubtful accounts resulting from the
inability of our customers to make required payments on accounts receivable. The
allowance for doubtful accounts is based upon specific and general customer
information, which also includes estimates based on our best understanding of
the customers’ ability to pay and their payment status. Customers’ ability
to pay takes into consideration payment history, legal status (i.e., bankruptcy)
and the status of services we are providing. We assess the payment status of
customers by reference to the terms under which services or goods are provided,
with any payments not made on or before their due date considered
past-due. Once we have exhausted all collection efforts, we write the
uncollectible balance off against the allowance for doubtful
accounts.
We record
an amount for service level agreements and other sales adjustments, which
reduces net accounts receivable and revenues. Adjustments for service level
agreements are identified within the billing period and revenues are reduced
accordingly. The amount for sales adjustments is based upon
specific customer information, including outstanding promotional credits,
customer disputes, credit adjustments not yet processed through the billing
system and historical activity. If the financial condition of our customers
deteriorates, or if we become aware of new information impacting a customer's
credit risk, we may make additional adjustments.
Revenue Recognition. The majority of our revenue is derived from high performance IP services, related data center services, CDN services and other ancillary products and services throughout the United States. We derive our IP services revenue from the sale of high performance Internet connectivity services at fixed rates or usage-based pricing to our customers that desire a DS-3 or faster connection. We provide slower T-1 and fractional DS-3 connections at fixed rates. Data center revenues include both physical space for hosting customers’ network and other equipment plus associated services such as redundant power and network connectivity, environmental controls and security. Data center revenue is based on occupied space and both allocated and variable-based usage. CDN product line revenue includes three components: (1) data storage; (2) streaming/delivery and (3) a user interface/reporting tool. We provide the CDN service components via internally developed and acquired technology that resides on our network. CDN services revenues are based on either fixed rates or usage-based pricing. All of the foregoing revenue arrangements have contractual terms and in many instances, include minimum usage commitments and provide the rate at which the customer must pay for actual usage above the monthly minimum. For these services, we recognize the monthly minimum as revenue each month provided that both parties have signed an enforceable contract, we have delivered the service to the customer, the fee for the service is fixed or determinable and collection is reasonably assured. If a customer’s usage of our services exceeds the monthly minimum, we recognize revenue for such excess in the period of the usage. We record the installation fees as deferred revenue and recognize as revenue ratably over the estimated life of the customer arrangement. We also derive revenue from services sold as discrete, non-recurring events or based solely on usage. For these services, we recognize revenue after both parties have signed an enforceable contract, the fee is fixed or determinable, the event or usage has occurred and collection is reasonably assured. Other ancillary products and services include our FCP product, server management and installation, virtual private networking, managed security, data backup, remote storage and restoration. We use contracts and sales or purchase orders as evidence of an arrangement. We test for availability or connectivity to verify delivery of our services. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Because the software component of our FCP is more than incidental to the product as a whole, we recognize associated FCP revenue in accordance with the American Institute of Certified Public Accountants’ Statement of Position 97-2, Software Revenue Recognition. - 33 - - We also enter into multiple-element arrangements or bundled services, such as combining IP services with data center and/or CDN services. When we enter into such arrangements, we account for each element separately over its respective service period or at the time of delivery, provided that there is objective evidence of fair value for the separate elements. Objective evidence of fair value includes the price charged for the element when sold separately. If we cannot objectively determine the fair value of each element, we recognize the total value of the arrangement ratably over the entire service period to the extent that we have begun to provide the services, and we have satisfied other revenue recognition criteria. Deferred revenue consists of revenues for services to be delivered in the future and consists primarily of advance billings, which we amortize over the respective service period. We defer and amortize revenues associated with billings for installation of customer network equipment over the estimated life of the customer relationship, which was two to three years during the three-year period ended December 31, 2008. We defer and amortize revenues for installation services because the installation service is integral to our primary service offering and does not have value to customers on a stand-alone basis. We also defer and amortize the associated incremental direct costs. We amortize deferred post-contract customer support associated with sales of our FCP and similar products ratably over the contract period, which is generally one year. We routinely review the collectability of our accounts receivable and payment status of our customers. If we determine that collection of service revenue is uncertain, we do not recognize revenue until collection is probable. Additionally, we maintain allowances for doubtful accounts resulting from the inability of our customers to make required payments on accounts receivable. The allowance for doubtful accounts is based upon specific and general customer information, which also includes estimates based on our best understanding of the customers’ ability to pay and their payment status. Customers’ ability to pay takes into consideration payment history, legal status (i.e., bankruptcy) and the status of services we are providing. We assess the payment status of customers by reference to the terms under which services or goods are provided, with any payments not made on or before their due date considered past-due. Once we have exhausted all collection efforts, we write the uncollectible balance off against the allowance for doubtful accounts. We record an amount for service level agreements and other sales adjustments, which reduces net accounts receivable and revenues. Adjustments for service level agreements are identified within the billing period and revenues are reduced accordingly. The amount for sales adjustments is based upon specific customer information, including outstanding promotional credits, customer disputes, credit adjustments not yet processed through the billing system and historical activity. If the financial condition of our customers deteriorates, or if we become aware of new information impacting a customer's credit risk, we may make additional adjustments. Revenue Recognition. The majority of our revenue is derived from high performance IP services, related data center services, CDN services and other ancillary products and services throughout the United States. We derive our IP services revenue from the sale of high performance Internet connectivity services at fixed rates or usage-based pricing to our customers that desire a DS-3 or faster connection. We provide slower T-1 and fractional DS-3 connections at fixed rates. Data center revenues include both physical space for hosting customers’ network and other equipment plus associated services such as redundant power and network connectivity, environmental controls and security. Data center revenue is based on occupied space and both allocated and variable-based usage. CDN product line revenue includes three components: (1) data storage; (2) streaming/delivery and (3) a user interface/reporting tool. We provide the CDN service components via internally developed and acquired technology that resides on our network. CDN services revenues are based on either fixed rates or usage-based pricing. All of the foregoing revenue arrangements have contractual terms and in many instances, include minimum usage commitments and provide the rate at which the customer must pay for actual usage above the monthly minimum. For these services, we recognize the monthly minimum as revenue each month provided that both parties have signed an enforceable contract, we have delivered the service to the customer, the fee for the service is fixed or determinable and collection is reasonably assured. If a customer’s usage of our services exceeds the monthly minimum, we recognize revenue for such excess in the period of the usage. We record the installation fees as deferred revenue and recognize as revenue ratably over the estimated life of the customer arrangement. We also derive revenue from services sold as discrete, non-recurring events or based solely on usage. For these services, we recognize revenue after both parties have signed an enforceable contract, the fee is fixed or determinable, the event or usage has occurred and collection is reasonably assured. Other ancillary products and services include our FCP product, server management and installation, virtual private networking, managed security, data backup, remote storage and restoration. We use contracts and sales or purchase orders as evidence of an arrangement. We test for availability or connectivity to verify delivery of our services. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Because the software component of our FCP is more than incidental to the product as a whole, we recognize associated FCP revenue in accordance with the American Institute of Certified Public Accountants’ Statement of Position 97-2, Software Revenue Recognition. - 33 - - We also enter into multiple-element arrangements or bundled services, such as combining IP services with data center and/or CDN services. When we enter into such arrangements, we account for each element separately over its respective service period or at the time of delivery, provided that there is objective evidence of fair value for the separate elements. Objective evidence of fair value includes the price charged for the element when sold separately. If we cannot objectively determine the fair value of each element, we recognize the total value of the arrangement ratably over the entire service period to the extent that we have begun to provide the services, and we have satisfied other revenue recognition criteria. Deferred revenue consists of revenues for services to be delivered in the future and consists primarily of advance billings, which we amortize over the respective service period. We defer and amortize revenues associated with billings for installation of customer network equipment over the estimated life of the customer relationship, which was two to three years during the three-year period ended December 31, 2008. We defer and amortize revenues for installation services because the installation service is integral to our primary service offering and does not have value to customers on a stand-alone basis. We also defer and amortize the associated incremental direct costs. We amortize deferred post-contract customer support associated with sales of our FCP and similar products ratably over the contract period, which is generally one year. We routinely review the collectability of our accounts receivable and payment status of our customers. If we determine that collection of service revenue is uncertain, we do not recognize revenue until collection is probable. Additionally, we maintain allowances for doubtful accounts resulting from the inability of our customers to make required payments on accounts receivable. The allowance for doubtful accounts is based upon specific and general customer information, which also includes estimates based on our best understanding of the customers’ ability to pay and their payment status. Customers’ ability to pay takes into consideration payment history, legal status (i.e., bankruptcy) and the status of services we are providing. We assess the payment status of customers by reference to the terms under which services or goods are provided, with any payments not made on or before their due date considered past-due. Once we have exhausted all collection efforts, we write the uncollectible balance off against the allowance for doubtful accounts. We record an amount for service level agreements and other sales adjustments, which reduces net accounts receivable and revenues. Adjustments for service level agreements are identified within the billing period and revenues are reduced accordingly. The amount for sales adjustments is based upon specific customer information, including outstanding promotional credits, customer disputes, credit adjustments not yet processed through the billing system and historical activity. If the financial condition of our customers deteriorates, or if we become aware of new information impacting a customer's credit risk, we may make additional adjustments. Revenue Recognition. The majority of our revenue is derived from high performance IP services, related data center services, CDN services and other ancillary products and services throughout the United States. We derive our IP services revenue from the sale of high performance Internet connectivity services at fixed rates or usage-based pricing to our customers that desire a DS-3 or faster connection. We provide slower T-1 and fractional DS-3 connections at fixed rates. Data center revenues include both physical space for hosting customers’ network and other equipment plus associated services such as redundant power and network connectivity, environmental controls and security. Data center revenue is based on occupied space and both allocated and variable-based usage. CDN product line revenue includes three components: (1) data storage; (2) streaming/delivery and (3) a user interface/reporting tool. We provide the CDN service components via internally developed and acquired technology that resides on our network. CDN services revenues are based on either fixed rates or usage-based pricing. All of the foregoing revenue arrangements have contractual terms and in many instances, include minimum usage commitments and provide the rate at which the customer must pay for actual usage above the monthly minimum. For these services, we recognize the monthly minimum as revenue each month provided that both parties have signed an enforceable contract, we have delivered the service to the customer, the fee for the service is fixed or determinable and collection is reasonably assured. If a customer’s usage of our services exceeds the monthly minimum, we recognize revenue for such excess in the period of the usage. We record the installation fees as deferred revenue and recognize as revenue ratably over the estimated life of the customer arrangement. We also derive revenue from services sold as discrete, non-recurring events or based solely on usage. For these services, we recognize revenue after both parties have signed an enforceable contract, the fee is fixed or determinable, the event or usage has occurred and collection is reasonably assured. Other ancillary products and services include our FCP product, server management and installation, virtual private networking, managed security, data backup, remote storage and restoration. We use contracts and sales or purchase orders as evidence of an arrangement. We test for availability or connectivity to verify delivery of our services. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Because the software component of our FCP is more than incidental to the product as a whole, we recognize associated FCP revenue in accordance with the American Institute of Certified Public Accountants’ Statement of Position 97-2, Software Revenue Recognition. - 33 - - We also enter into multiple-element arrangements or bundled services, such as combining IP services with data center and/or CDN services. When we enter into such arrangements, we account for each element separately over its respective service period or at the time of delivery, provided that there is objective evidence of fair value for the separate elements. Objective evidence of fair value includes the price charged for the element when sold separately. If we cannot objectively determine the fair value of each element, we recognize the total value of the arrangement ratably over the entire service period to the extent that we have begun to provide the services, and we have satisfied other revenue recognition criteria. Deferred revenue consists of revenues for services to be delivered in the future and consists primarily of advance billings, which we amortize over the respective service period. We defer and amortize revenues associated with billings for installation of customer network equipment over the estimated life of the customer relationship, which was two to three years during the three-year period ended December 31, 2008. We defer and amortize revenues for installation services because the installation service is integral to our primary service offering and does not have value to customers on a stand-alone basis. We also defer and amortize the associated incremental direct costs. We amortize deferred post-contract customer support associated with sales of our FCP and similar products ratably over the contract period, which is generally one year. We routinely review the collectability of our accounts receivable and payment status of our customers. If we determine that collection of service revenue is uncertain, we do not recognize revenue until collection is probable. Additionally, we maintain allowances for doubtful accounts resulting from the inability of our customers to make required payments on accounts receivable. The allowance for doubtful accounts is based upon specific and general customer information, which also includes estimates based on our best understanding of the customers’ ability to pay and their payment status. Customers’ ability to pay takes into consideration payment history, legal status (i.e., bankruptcy) and the status of services we are providing. We assess the payment status of customers by reference to the terms under which services or goods are provided, with any payments not made on or before their due date considered past-due. Once we have exhausted all collection efforts, we write the uncollectible balance off against the allowance for doubtful accounts. We record an amount for service level agreements and other sales adjustments, which reduces net accounts receivable and revenues. Adjustments for service level agreements are identified within the billing period and revenues are reduced accordingly. The amount for sales adjustments is based upon specific customer information, including outstanding promotional credits, customer disputes, credit adjustments not yet processed through the billing system and historical activity. If the financial condition of our customers deteriorates, or if we become aware of new information impacting a customer's credit risk, we may make additional adjustments. These excerpts taken from the INAP 10-K filed Apr 30, 2008. Revenue
recognition. The
majority of our revenue is derived from high performance IP services, related
data center services, CDN services, and other ancillary products and services
throughout the United States. Our IP services revenue is derived from the sale
of high performance Internet connectivity services at fixed rates or usage-based
pricing to our customers that desire a DS-3 or faster
connection. Slower T-1 and fractional DS-3 connections are provided
at fixed rates. Data center revenue includes both physical space for
hosting customers’ network and other equipment plus associated services such as
redundant power and network connectivity, environmental controls and
security. Data center revenue is based on occupied square feet and
both allocated and variable-based usage. CDN revenue includes three
components, none of which are sold separately: (1) data storage; (2)
streaming/delivery and (3) a user interface/reporting tool. We
provide the CDN service components via internally developed and acquired
technology that resides on our network. CDN revenue is based on
either fixed rates or usage-based pricing. All of the foregoing
revenue arrangements have contractual terms and in many instances, include
minimum usage commitments. Other ancillary products and services
include our Flow Control Platform, or FCP, product, server management and
installation, virtual private networking, managed security, data backup, remote storage and
restoration.
We
recognize revenue in accordance with the Securities
and Exchange Commission’s Staff Accounting Bulletin No. 104,
Revenue Recognition,
or
SAB No. 104, and
the Financial Accounting Standards Board’s,
or FASB, Emerging
Issues Task Force Issue No. 00-21,
Revenue Arrangements with Multiple Deliverables,
or EITF No. 00-21. Revenue
is recognized when persuasive evidence of an arrangement exists, the
product or service has been delivered, the fees are fixed or determinable and
collectibility is probable. For most of our IP, data center and CDN
revenue, services are delivered ratably over the contract term. Contracts and
sales or purchase orders are used to determine the existence of an arrangement.
We test for availability or connectivity to verify delivery of our services. We
assess whether the fee is fixed or determinable based on the payment terms
associated with the transaction and whether the sales price is subject to refund
or adjustment. Because the software component of our FCP is more than
incidental to the product as a whole, we recognize associated FCP revenue in
accordance with the American Institute of Certified Public Accountants’ (AICPA)
Statement of Position 97-2, Software
Revenue Recognition.
We
derive revenue from the sale of IP services, data center services and
CDN services to customers
under contracts that generally commit the customer to a minimum monthly level of
usage on a calendar month basis and provide the rate at which the customer must
pay for actual usage above the monthly minimum. For these services, we recognize
the monthly minimum as revenue each month provided that an enforceable contract
has been signed by both parties, the service has been delivered to the customer,
the fee for the service is fixed or determinable and collection is reasonably
assured. Should a customer’s usage of our services exceed the monthly minimum,
we recognize revenue for such excess in the period of the usage. We record the
installation fees as deferred revenue and recognize as revenue ratably over the
estimated life of the customer arrangement. We also derive revenue from services
sold as discrete, non-recurring events or based solely on usage. For these
services, we recognize revenue after both parties have signed an enforceable
contract, the fee is fixed or determinable, the event or usage has occurred and
collection is reasonably assured.
36
We also enter into multiple-element arrangements
or bundled services, such as combining IP services with data center, CDN services or both. When we enter into such arrangements,
we account for each element
separately over its respective service period or at the time of delivery,
provided that there is objective evidence of fair value for the separate
elements. Objective evidence of fair value includes the price charged for the
element when sold separately. If we cannot objectively determine the fair value
of each element, we recognize the total value of the arrangement ratably over
the entire service period to the extent that we have begun to provide the
services, and other revenue recognition criteria have been
satisfied.
Deferred
revenue consists of revenue for services to be delivered in the future and
consist primarily of advance billings, which are amortized over the respective
service period. Revenue associated with billings for installation of customer
network equipment are deferred and amortized over the estimated life of the
customer relationship, which was two to three years for each of the three years
in the period ended December 31, 2007. Revenue for installation
services is deferred and amortized because the installation service is integral
to our primary service offering and does not have value to a customer on a
stand-alone basis. Deferred post-contract customer support associated with sales
of our FCP solution and similar products are amortized ratably over the contract
period, which is generally one year.
Revenue recognition. The majority of our revenue is derived from high performance IP services, related data center services, CDN services, and other ancillary products and services throughout the United States. Our IP services revenue is derived from the sale of high performance Internet connectivity services at fixed rates or usage-based pricing to our customers that desire a DS-3 or faster connection. Slower T-1 and fractional DS-3 connections are provided at fixed rates. Data center revenue includes both physical space for hosting customers’ network and other equipment plus associated services such as redundant power and network connectivity, environmental controls and security. Data center revenue is based on occupied square feet and both allocated and variable-based usage. CDN revenue includes three components, none of which are sold separately: (1) data storage; (2) streaming/delivery and (3) a user interface/reporting tool. We provide the CDN service components via internally developed and acquired technology that resides on our network. CDN revenue is based on either fixed rates or usage-based pricing. All of the foregoing revenue arrangements have contractual terms and in many instances, include minimum usage commitments. Other ancillary products and services include our Flow Control Platform, or FCP, product, server management and installation, virtual private networking, managed security, data backup, remote storage and restoration. We recognize revenue in accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104, Revenue Recognition, or SAB No. 104, and the Financial Accounting Standards Board’s, or FASB, Emerging Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, or EITF No. 00-21. Revenue is recognized when persuasive evidence of an arrangement exists, the product or service has been delivered, the fees are fixed or determinable and collectibility is probable. For most of our IP, data center and CDN revenue, services are delivered ratably over the contract term. Contracts and sales or purchase orders are used to determine the existence of an arrangement. We test for availability or connectivity to verify delivery of our services. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Because the software component of our FCP is more than incidental to the product as a whole, we recognize associated FCP revenue in accordance with the American Institute of Certified Public Accountants’ (AICPA) Statement of Position 97-2, Software Revenue Recognition. We derive revenue from the sale of IP services, data center services and CDN services to customers under contracts that generally commit the customer to a minimum monthly level of usage on a calendar month basis and provide the rate at which the customer must pay for actual usage above the monthly minimum. For these services, we recognize the monthly minimum as revenue each month provided that an enforceable contract has been signed by both parties, the service has been delivered to the customer, the fee for the service is fixed or determinable and collection is reasonably assured. Should a customer’s usage of our services exceed the monthly minimum, we recognize revenue for such excess in the period of the usage. We record the installation fees as deferred revenue and recognize as revenue ratably over the estimated life of the customer arrangement. We also derive revenue from services sold as discrete, non-recurring events or based solely on usage. For these services, we recognize revenue after both parties have signed an enforceable contract, the fee is fixed or determinable, the event or usage has occurred and collection is reasonably assured. 36 We also enter into multiple-element arrangements or bundled services, such as combining IP services with data center, CDN services or both. When we enter into such arrangements, we account for each element separately over its respective service period or at the time of delivery, provided that there is objective evidence of fair value for the separate elements. Objective evidence of fair value includes the price charged for the element when sold separately. If we cannot objectively determine the fair value of each element, we recognize the total value of the arrangement ratably over the entire service period to the extent that we have begun to provide the services, and other revenue recognition criteria have been satisfied. Deferred revenue consists of revenue for services to be delivered in the future and consist primarily of advance billings, which are amortized over the respective service period. Revenue associated with billings for installation of customer network equipment are deferred and amortized over the estimated life of the customer relationship, which was two to three years for each of the three years in the period ended December 31, 2007. Revenue for installation services is deferred and amortized because the installation service is integral to our primary service offering and does not have value to a customer on a stand-alone basis. Deferred post-contract customer support associated with sales of our FCP solution and similar products are amortized ratably over the contract period, which is generally one year. These excerpts taken from the INAP 10-K filed Mar 31, 2008. Revenue
recognition. The
majority of our revenue is derived from high performance IP services, related
data center services, CDN services, and other ancillary products and services
throughout the United States. Our IP services revenue is derived from the sale
of high performance Internet connectivity services at fixed rates or usage-based
pricing to our customers that desire a DS-3 or faster
connection. Slower T-1 and fractional DS-3 connections are provided
at fixed rates. Data center revenue includes both physical space for
hosting customers’ network and other equipment plus associated services such as
redundant power and network connectivity, environmental controls and
security. Data center revenue is based on occupied square feet and
both allocated and variable-based usage. CDN revenue includes three
components, none of which are sold separately: (1) data storage; (2)
streaming/delivery and (3) a user interface/reporting tool. We
provide the CDN service components via internally developed and acquired
technology that resides on our network. CDN revenue is based on
either fixed rates or usage-based pricing. All of the foregoing
revenue arrangements have contractual terms and in many instances, include
minimum usage commitments. Other ancillary products and services
include our Flow Control Platform, or FCP, product, server management and
installation, virtual private networking, managed security, data backup, remote storage and
restoration.
We
recognize revenue in accordance with the Securities
and Exchange Commission’s Staff Accounting Bulletin No. 104,
Revenue Recognition,
or
SAB No. 104, and
the Financial Accounting Standards Board’s,
or FASB, Emerging
Issues Task Force Issue No. 00-21,
Revenue Arrangements with Multiple Deliverables,
or EITF No. 00-21. Revenue
is recognized when persuasive evidence of an arrangement exists, the
product or service has been delivered, the fees are fixed or determinable and
collectibility is probable. For most of our IP, data center and CDN
revenue, services are delivered ratably over the contract term. Contracts and
sales or purchase orders are used to determine the existence of an arrangement.
We test for availability or connectivity to verify delivery of our services. We
assess whether the fee is fixed or determinable based on the payment terms
associated with the transaction and whether the sales price is subject to refund
or adjustment. Because the software component of our FCP is more than
incidental to the product as a whole, we recognize associated FCP revenue in
accordance with the American Institute of Certified Public Accountants’ (AICPA)
Statement of Position 97-2, Software
Revenue Recognition.
We
derive revenue from the sale of IP services, data center services and
CDN services to customers
under contracts that generally commit the customer to a minimum monthly level of
usage on a calendar month basis and provide the rate at which the customer must
pay for actual usage above the monthly minimum. For these services, we recognize
the monthly minimum as revenue each month provided that an enforceable contract
has been signed by both parties, the service has been delivered to the customer,
the fee for the service is fixed or determinable and collection is reasonably
assured. Should a customer’s usage of our services exceed the monthly minimum,
we recognize revenue for such excess in the period of the usage. We record the
installation fees as deferred revenue and recognize as revenue ratably over the
estimated life of the customer arrangement. We also derive revenue from services
sold as discrete, non-recurring events or based solely on usage. For these
services, we recognize revenue after both parties have signed an enforceable
contract, the fee is fixed or determinable, the event or usage has occurred and
collection is reasonably assured.
36
We also enter into multiple-element arrangements
or bundled services, such as combining IP services with data center, CDN services or both. When we enter into such arrangements,
we account for each element
separately over its respective service period or at the time of delivery,
provided that there is objective evidence of fair value for the separate
elements. Objective evidence of fair value includes the price charged for the
element when sold separately. If we cannot objectively determine the fair value
of each element, we recognize the total value of the arrangement ratably over
the entire service period to the extent that we have begun to provide the
services, and other revenue recognition criteria have been
satisfied.
Deferred
revenue consists of revenue for services to be delivered in the future and
consist primarily of advance billings, which are amortized over the respective
service period. Revenue associated with billings for installation of customer
network equipment are deferred and amortized over the estimated life of the
customer relationship, which was two to three years for each of the three years
in the period ended December 31, 2007. Revenue for installation
services is deferred and amortized because the installation service is integral
to our primary service offering and does not have value to a customer on a
stand-alone basis. Deferred post-contract customer support associated with sales
of our FCP solution and similar products are amortized ratably over the contract
period, which is generally one year.
Revenue recognition. The majority of our revenue is derived from high performance IP services, related data center services, CDN services, and other ancillary products and services throughout the United States. Our IP services revenue is derived from the sale of high performance Internet connectivity services at fixed rates or usage-based pricing to our customers that desire a DS-3 or faster connection. Slower T-1 and fractional DS-3 connections are provided at fixed rates. Data center revenue includes both physical space for hosting customers’ network and other equipment plus associated services such as redundant power and network connectivity, environmental controls and security. Data center revenue is based on occupied square feet and both allocated and variable-based usage. CDN revenue includes three components, none of which are sold separately: (1) data storage; (2) streaming/delivery and (3) a user interface/reporting tool. We provide the CDN service components via internally developed and acquired technology that resides on our network. CDN revenue is based on either fixed rates or usage-based pricing. All of the foregoing revenue arrangements have contractual terms and in many instances, include minimum usage commitments. Other ancillary products and services include our Flow Control Platform, or FCP, product, server management and installation, virtual private networking, managed security, data backup, remote storage and restoration. We recognize revenue in accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104, Revenue Recognition, or SAB No. 104, and the Financial Accounting Standards Board’s, or FASB, Emerging Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, or EITF No. 00-21. Revenue is recognized when persuasive evidence of an arrangement exists, the product or service has been delivered, the fees are fixed or determinable and collectibility is probable. For most of our IP, data center and CDN revenue, services are delivered ratably over the contract term. Contracts and sales or purchase orders are used to determine the existence of an arrangement. We test for availability or connectivity to verify delivery of our services. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Because the software component of our FCP is more than incidental to the product as a whole, we recognize associated FCP revenue in accordance with the American Institute of Certified Public Accountants’ (AICPA) Statement of Position 97-2, Software Revenue Recognition. We derive revenue from the sale of IP services, data center services and CDN services to customers under contracts that generally commit the customer to a minimum monthly level of usage on a calendar month basis and provide the rate at which the customer must pay for actual usage above the monthly minimum. For these services, we recognize the monthly minimum as revenue each month provided that an enforceable contract has been signed by both parties, the service has been delivered to the customer, the fee for the service is fixed or determinable and collection is reasonably assured. Should a customer’s usage of our services exceed the monthly minimum, we recognize revenue for such excess in the period of the usage. We record the installation fees as deferred revenue and recognize as revenue ratably over the estimated life of the customer arrangement. We also derive revenue from services sold as discrete, non-recurring events or based solely on usage. For these services, we recognize revenue after both parties have signed an enforceable contract, the fee is fixed or determinable, the event or usage has occurred and collection is reasonably assured. 36 We also enter into multiple-element arrangements or bundled services, such as combining IP services with data center, CDN services or both. When we enter into such arrangements, we account for each element separately over its respective service period or at the time of delivery, provided that there is objective evidence of fair value for the separate elements. Objective evidence of fair value includes the price charged for the element when sold separately. If we cannot objectively determine the fair value of each element, we recognize the total value of the arrangement ratably over the entire service period to the extent that we have begun to provide the services, and other revenue recognition criteria have been satisfied. Deferred revenue consists of revenue for services to be delivered in the future and consist primarily of advance billings, which are amortized over the respective service period. Revenue associated with billings for installation of customer network equipment are deferred and amortized over the estimated life of the customer relationship, which was two to three years for each of the three years in the period ended December 31, 2007. Revenue for installation services is deferred and amortized because the installation service is integral to our primary service offering and does not have value to a customer on a stand-alone basis. Deferred post-contract customer support associated with sales of our FCP solution and similar products are amortized ratably over the contract period, which is generally one year. | EXCERPTS ON THIS PAGE:
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