Company: MSTR
Filing Date: 2025-02-18
Form Type: 10-K
Source: 0000950170-25-021814
Chunk: 510

Company: Strategy Inc
Filing Date: 2025-02-18
Form: 10-K
Item: Item 2
Chunk 510
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 payment and performance is one year or less.  However, there are circumstances where the timing between cash payment and performance may exceed one year.  These circumstances generally involve prepaid multi-year license, product support and subscription services arrangements where the customer determines when the service is utilized.  In these circumstances, the Company has determined no significant financing component exists because the customer controls when to utilize the service and because there are significant business purposes behind the timing difference between payment and performance (e.g., ensuring collectability in the case of subscription services). Allocating the Transaction Price Based on Standalone Selling Prices (SSP)The Company allocates the transaction price to each performance obligation in a contract based on its relative SSP.  The SSP is the price, or estimated price, of the software or service when sold on a standalone basis at contract inception.  In circumstances where SSP is not directly observable, the Company estimates SSP using the following methodologies:(i)Product licenses – Product licenses are not sold on a standalone basis and pricing is highly variable.  The Company establishes SSP of product licenses using a residual approach after first establishing the SSP of standard product support.  Standard product support is sold on a standalone basis within a narrow range of the stated net license fee, and because an economic relationship exists between product licenses and standard product support, the Company has concluded that the residual method to estimate SSP of product licenses sold on both a perpetual and term basis is a fair allocation of the transaction price.(ii)Subscription services – Given the highly variable selling price of subscription services, the Company establishes the SSP of its subscription services arrangements using a similar residual approach after first establishing the SSP of consulting and 

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education services to the extent they are included in the arrangement. The Company has concluded that the residual method to estimate SSP of its subscription services is a fair allocation of the transaction price.(iii)Standard product support – The Company establishes SSP of standard product support as a percentage of the stated net license fee, given such pricing is consistent with its normal pricing practices and there exists sufficient history of customers renewing standard product support on a standalone basis at similar percentages.  Semi-annually, the Company tracks renewal rates negotiated when standard product support is initially sold with a perpetual license in order to determine the SSP of standard product support within each geographic region for the upcoming quarter. If the stated standard product support fee falls within the SSP range, the specific rate in the contract will be used to determine SSP. If the stated fee is above or below SSP, the highest or lowest end of the range,