A funny thing to explain to software people: the most important assets of your company generally aren't materially on your balance sheet.
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Replying to @patio11
For example, if you buy a SaaS company, you're generally buying existing user relationships. If those accounts are on month-to-month plans /
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Replying to @patio11
they're effectively invisible on the balance sheet. GAAP assumes that all your sales next month are by grace of God, not recurring billing.
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Replying to @patio11
"If you do annual billing?" Another counterintuitive result: you'll book a *liability* to your customers which grows as you get more of them
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Replying to @patio11
Meanwhile, the other major asset of a software company is (duh duh duh) software, and the majority doesn't become a formal asset.
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("When does it?" When you acquire a system or capitalize individual projects, generally for tax purposes or taking advantage of credits.)
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