On January 1, 2019, we adopted ASU 2014-09, ("Topic 606"), Revenue from Contracts with Customers, which replaced the existing revenue recognition guidance, ("ASC 605"), and outlines a single set of comprehensive principles for recognizing revenue under U.S. GAAP. Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We determine revenue recognition through the following five-step approach:

We adopted ASU 2014-09 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under Topic 606, while prior period amounts are not adjusted, and continue to be reported in accordance with our historical accounting under Topic 605. With the adoption of Topic 606, we also adopted ASC Topic 340-40, "Other Assets and Deferred Costs". Prior to the adoption of Topic 340, we previously recognized sales commissions related to obtaining customer contracts in the sales and marketing line item of the Consolidated Statement of Operations. Under Topic 340-40, we capitalize sales commissions as contract costs when they are incremental, directly incurred to obtain a contract with a customer, and expected to be recoverable. These costs are amortized over the expected period of benefit on a straight-line basis. We recorded a cumulative catch-up adjustment to the opening retained earnings of $5.7 million, as of January 1, 2019, due to the cumulative impact of adopting Topic 606 and Topic 340-40. The area impacted was related to the treatment of incremental costs of obtaining contracts with customers. The impact from applying Topic 606 and Topic 340 as of and for the year ended December 31, 2019 is as follows:

Consolidated Balance Sheets



	As of December 31, 2019
	As currently reported			Impact of adopting ASC 606 and ASC 340-40			As would have been reported under previous revenue standards
	(in thousands)
Other assets	$	10,112		$	(5,588	)	$	4,524
Total assets	320,969			(5,588		)	315,381
Accumulated deficit	(192,009		)	(5,588		)	(197,597		)
Total stockholders’ equity (deficit)	257,652			(5,588		)	252,064
Total liabilities and stockholders’ equity (deficit)	$	320,969		$	(5,588	)	$	315,381



	Year ended December 31, 2019
	As currently reported			Impact of adopting ASC 606 and ASC 340-40			As would have been reported under previous revenue standards
	(in thousands)
Sales and marketing	$	71,097		$	(139	)	$	70,958
Total operating expenses	158,688			(139		)	158,549
Loss from operations	(46,548		)	139			(46,409		)
Loss before income taxes	(51,058		)	139			(50,919		)
Net loss	(51,550		)	139			(51,411		)
Comprehensive loss	$	(51,318	)	$	139		$	(51,179	)

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, each of which are distinct and accounted for as separate performance obligations. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in Topic 606. Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using our estimate of the standalone selling price ("SSP") of each distinct good or service in the contract.

Judgment is required to determine the SSP for each distinct performance obligation. We analyze separate sales of our products and services as a basis for estimating the SSP of our products and services. We then use that SSP as the basis for allocating the transaction price when our product and services are sold together in a contract with multiple performance obligations. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and other observable inputs. We typically have more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances. In these instances, we may use information, such geographic region and distribution channel, in determining the SSP.

The transaction price in a contract is typically equal to the minimum commit price in the contract less any discounts provided. Because our typical contracts represent distinct services delivered over time with the same pattern of transfer to the customer, usage-based consideration primarily related to actual consumption over the minimum commit levels is allocated to the period to which it relates. The amount of consideration recognized for usage above the minimum commit price is limited to the amount we expect to be entitled to receive in exchange for providing services. We have elected to apply the practical expedient for estimating and disclosing the variable consideration when variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation from our remaining performance obligations under these contracts.

Performance obligations represent stand-ready obligations that are satisfied over time as the customer simultaneously receives and consumes the benefits provided by us. These obligations can be content delivery, security, professional services, support, edge cloud platform services, and others. Accordingly, our revenue is recognized over time, consistent with the pattern of benefit provided to the customer over the term of the agreement.

In contracts where there are timing differences between when we transfer a promised good or service to the customer and when the customer pays for that good or service, we have determined our contracts do not include a significant financing component. We have also elected the practical expedient to not measure financing components for any contract where the timing difference is less than one year.

From time to time we enter into arrangements to establish and run private POPs for customers. These arrangements include content delivery services as well as professional services and the provision of hardware. For accounting purposes, we have determined that the provisioning of hardware is an operating lease. We recognize the revenue from these leases monthly on a straight-line basis over the term of the relevant customer agreements.

We primarily derive revenue from the sale of services to customers executing contracts in which the standard contract term is one year, although terms may vary by contract. Most of our contracts are non-cancelable over the contractual term. These contracts commit the customer to a minimum monthly level of usage and specify the rate at which the customer must pay for actual usage above the monthly minimum.

The timing of revenue recognition may differ from the timing of invoicing to customers. We have an unconditional right to consideration when we invoice our customers and record a receivable. We record a contract asset when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue is recognized subsequent to invoicing.

Deferred revenue includes amounts billed to customers for which revenue has not been recognized and consists of the unearned portions of edge cloud platform usage. Our payment terms and conditions vary by contract type, but our standard terms are that payments are due within 15 days from the date of invoice.

As of December 31, 2019, we had $70.7 million of remaining performance obligations, which includes deferred revenue and amounts that will be invoiced and recognized in future periods. The remaining performance obligations are limited only to arrangements that meet the definition of a contract under Topic 606 as of December 31, 2019. In addition to the practical expedient discussed above, we applied the practical expedient giving the optional exemption from disclosing the information about our remaining performance obligations for our service contracts for which the original contract duration is one year or less. The typical contract term is one year, although terms may vary by contract. We expect to recognize 89% of this balance over the next 12 months and the remainder within the following year.

We capitalize incremental costs associated with obtaining customer contracts, specifically for sales commissions. These costs are deferred on our Consolidated Balance Sheets and amortized over the expected period of benefit on a straight-line basis. Based on the nature of our unique technology and services, the rate at which we continually enhance and update our technology, and our historical customer retention, the expected period of benefit is determined to be approximately five years. Amortization is recorded within the sales and marketing line item on the accompanying Consolidated Statements of Operations. The incremental costs associated with obtaining customer contracts, the majority of which are deferred commissions, are included in other assets on the accompanying Consolidated Balance Sheets.