CA Technologies is a software company that designs, develops, installs, and services business software for manufacturing companies. Typically, CA Technologies provides its services over a multiyear period. Following the release of SAB 101, the company changed its method of recognizing revenue under its multiyear service contracts. Originally, CA Technologies recognized all contract revenue at the time that a contract was signed; however, consistent with SAB 101, the company decided to recognize contract revenue on a prorata basis over the life of each multiyear contract.

1. How will the change in revenue recognition policy affect the following items on the financial statements of CA Technologies?

a. Revenue

c. Cash flow from operations

b. Total assets

d. Total liabilities 

2. Do you agree with the policy change implemented by CA Technologies? Why?