Microsoft may be offering a free upgrade to Windows 10 for consumers who own a Windows 7 or 8.1 PC. However, for accounting purposes, the company is labeling this generous deal as a "marketing and promotional activity" in order to avoid a situation that would have normally forced Microsoft to defer revenues from the Windows division in their quarterly financial results.
Microsoft filed a detailed report on their 2015 fiscal third quarter results last week to the US Securities and Exchange Commission. The report mentions the free upgrade to Windows 10 for Windows 7 and 8.1 users:
"This offer differs from historical offers preceding the launch of new versions of Windows as it is being made available for free to existing users in addition to new customers after the offer announcement We evaluated the nature and accounting treatment of the Windows 10 offer and determined that it represents a marketing and promotional activity, in part because the offer is being made available for free to existing users."
As noted by Computerworld, the language in that statement is important to Microsoft for accounting and revenue purposes.
"If it said Windows 10 was an upgrade, not part of a marketing campaign, the company would have had to adjust Windows revenue to account for the deferrals -- and set aside money from sales of the OS starting in January when it announced the no-cost upgrade -- reducing Windows' earnings for at least the first half of this year, perhaps longer. That could have painted an even darker picture of Windows revenue, maybe one that would have bothered skittish short-term investors enough to impact the stock."
So in other words, labeling the Windows 10 free upgrade as a "marketing" tool helps Microsoft in the long run financially, and may keep its stock price from going down in the short term.
Source: SEC.gov, Computerworld
