SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Apr. 30, 2019

Notes to Financial Statements

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency in presentation with the current year presentation to better present this year’s grouping. The footnotes were added to present the sales by geographic area and line of business. These reclassifications had no effect on the reported results of operations.

Recently Adopted Accounting Pronouncements

In April 2016, the FASB issued ASU 2016–10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Topic 606 includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments are intended to render more detailed implementation guidance with the expectation to reduce the degree of judgement necessary to comply with Topic 606.

ASC Topic 606 prescribes a new five-step model entities should follow in order to recognize revenue in accordance with the core principle. These five steps are:

1.	Identify the contract(s) with a customer.
2.	Identify the performance obligations in the contract.
3.	Determine the transaction price.
4.	Allocate the transaction price to the performance obligations in the contract.
5.	Recognize revenue when (or as) the entity satisfied the performance obligations.

The Company has five revenue streams, each of which the revenue is recognized in accordance to the five steps included in topic 606. The revenue streams are:

1.	Sale of software direct to the end customer
2.	Sale of software through distributors and channel partners
3.	Maintenance support services
4.	Cloud services
5.	Hardware sales (Skkynet Japan only)

Effective November 1, 2018, the Company implemented the transition using the modified retrospective method of transition. Under this method the determination date of open contracts which could affect any adjustments was November 1, 2018. The open contracts at the time period are the unfulfilled portions of the maintenance contracts. Based on the cut off treatment of the recognition of revenue on the open contracts being determined at the end of the previous period and being no changes in the open obligation requirements, the Company has determined that there are no adjustments in the value of the revenue recognized from these contracts.

As part of the revenue recognition reporting, the Company reports revenue by product line and geographic area.  During the six month periods ended April 30, 2019 and 2018 the revenue by product line was as follows:

Category	2019		2018
Product sales	$	499,463	$	495,340
Support		183,691		168,763
Other		18,043		29,714
Total	$	701,197	$	693,817

The Company sells its products on a worldwide basis.  During the six month periods ended April 30, 2019 and 2018 the Company’s revenue resulted in the following amounts geographically:

Area	Percentage			2019		2018
North America		39	%	$	269,858	$	242,603
Europe		36	%		252,293		216,029
Asia		17	%		121,900		163,639
Middle East-Africa		7	%		46,870		31,999
South America		1	%		10,276		39,547
Total		100	%	$	701,197	$	693,817