How does Dropbox apply GAAP to revenue recognition? Explain and give examples

GAAP stipulates that revenues in an entity have to be recognized when earned and realized, and not necessarily when received. Dropbox generate revenue from sales of subscriptions and follows the GAAP where the revenue from subscription sales or renewals to be recognized when earned. Revenue will be recognized by Dropbox ratably over the related term of contract beginning on the date that the platform will be open for a customer. For example: For the monthly contracts Dropbox bill in advance and annually receives in advance for contracts with terms of one year or longer. The amount will be initially recorded as deferred revenue for the amounts that have been billed until the revenue is recognized. Consequently a huge portion of the revenue will be shown as deferred revenue from subscriptions entered into during previous quarters, and upturns or downturns in the renewal, sales and potential changes in pricing policy of subscription may not be depicted in the operation's result until later periods.