Company: NTWK
Filing Date: 2025-09-29
Form Type: 10-K
Source: 0001493152-25-015950
Chunk: 123

Company: NETSOL TECHNOLOGIES INC
Filing Date: 2025-09-29
Form: 10-K
Item: Item 1
Chunk 123
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or hours expended to measure progress. Judgment is required in estimating project status and the costs necessary to complete projects.
A number of internal and external factors can affect these estimates, including labor rates, utilization, specification variances and
testing requirement changes.

If
a group of agreements are entered at or near the same time and so closely related that they are, in effect, part of a single arrangement,
such agreements are deemed to be combined as one arrangement for revenue recognition purposes. The Company exercises significant judgment
to evaluate the relevant facts and circumstances in determining whether agreements should be accounted for separately or as a single
arrangement. The Company’s judgments about whether a group of contracts comprise a single arrangement can affect the allocation
of consideration to the distinct performance obligations, which could have an effect on results of operations for the periods involved.

If
a contract includes variable consideration, the Company exercises judgment in estimating the amount of consideration to which the entity
will be entitled in exchange for transferring the promised goods or services to a customer. When estimating variable consideration, the
Company will consider all relevant facts and circumstances. Variable consideration will be estimated and included in the contract price
only when it is probable that a significant reversal in the amount of revenue recognized will not occur.

Contract
Balances 

The
timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in receivables,
contract assets (revenues in excess of billings), or contract liabilities (unearned revenue) on the Company’s Consolidated Balance
Sheets. The Company records revenues in excess of billings when the Company has transferred goods or services but does not yet have the
right to consideration. The Company records unearned revenue when the Company has received or has the right to receive consideration
but has not yet transferred goods or services to the customer.

Unearned
Revenue

The
Company typically invoices its customers for subscription and support fees in advance on a quarterly or annual basis, with payment due
at the start of the subscription or support term. Unpaid invoice amounts for non-cancellable license and services starting in future
periods are included in accounts receivable and unearned revenue.

17

Practical
Expedients and Exemptions

There
are several practical expedients and exemptions allowed under Topic 606 that impact timing of revenue recognition and the Company’s
disclosures. The Company has applied the following practical expedients:

● The
Company does not evaluate a contract for a significant financing component if payment is expected within one year