It's becoming an increasingly important part of Cisco's offerings to service providers. In financial terms, FLs are equivalent to the sale of a product. Revenue is generally recognized at the time the equipment is shipped. Customers typically remit lease payments over a three-year period. When Cisco enters into OLs, the transaction is similar to having Cisco rent the property to the customer.
Cisco recognizes revenue over the term of the lease, which is typically two to three years.
SLs are the riskiest type of financing transaction for Cisco. In these transactions, Cisco provides a financing option under which the customer purchases equipment, but pays for it by establishing a related debt with Cisco. In addition to Cisco equipment, the transaction can also include financing for costs associated with the buildout of the customer's network. Conservative reserves are taken for funds Cisco provides to assist with the purchase of non-Cisco equipment. Revenue for Cisco products financed by SLs is generally deferred at the time of shipment and is only recognized over the term of the loan as cash payments are received.