Doubt - deferred revenue write-down in SaaS
Hi monkeys,
In an acquisition of a SaaS company, the deferred revenue is usually written-down in the range of 20-40%, and as far as I am aware that it is due to an accounting anomaly in GAAP accounting rules, since the deferred revenue has to be evaluated at fair-value at the moment of the acquisition. Hence, when deferred revenue is evaluated, it is worth significantly less than the book value.
When recognized: Deferred revenue = COGS + profit margin
I think that the in the SaaS industry, the largest chunk of the cost is incurred in the beginning, and therefore the book-value will be lower than the fair-value, but how exactly is the FV estimated?
Can someone pls share a more intuitive way of thinking about it?
Thank you very much in advance