With Windows as a Service, Microsoft changes how it reports revenue for Windows 10

Microsoft will change the way it regularly reports revenue to shareholders after Windows 10 comes out on July 29. Today Microsoft issued a PowerPoint presentation going over the finer points of the changes.

“We will have a new revenue recognition model because Windows 10 will include software updates provided over time, rather than at specifically priced software upgrade events, which will result in the deferral of revenue,” Microsoft wrote on one slide in the presentation (.PPTX). This reflects Microsoft’s strategic shift to what it calls “Windows as a Service.”

Deferred revenue will show up on the “Corporate and Other” line of Microsoft’s quarterly earnings statements once people start to pay for Windows 10. Microsoft’s balance sheet will also be affected. Here’s a slide showing the changes:

Above: How Microsoft’s earnings statements will change with Windows 10.

Image Credit: Screenshot

What doesn’t change, Microsoft said in the slide deck, is the “software licensing business model and the associated method or timing of consumer billings or cash collections with the introduction of Windows 10.”

The other thing that doesn’t change is that Microsoft still plans to give free Windows 10 upgrades to people running genuine versions of Windows 7 and Windows 8.1.