Exhibit 4. Selected Footnotes from NetSuite Inc.'s Financial Statements Revenue Recognition The Company generates revenue from two sources: (1) subscription and support; and (2) professional services and other. Subscription and support revenue includes subscription fees from customers accessing its cloud-based application suite and support fees from customers purchasing support. Arrangements with customers do not provide the customer with the right to take possession of the software supporting the cloud-based application service at any time. For the most part, professional services and other revenue include fees from consultation services to support the business process mapping, configuration, data migration, integration, and training. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been mer. For the most part, subscription and support agreements are entered into for 12 to 36 months. In aggregate, more than 90% of the professional services component of the arrangements with customers is performed within 300 days of entering into a contract with the customer. The subscription agreements provide service-level commitments of 99.5% uptime per period, excluding scheduled maintenance. The failure to meet this level of service availability may require the Company to credit qualifying customers up to the value of an entire month of their subscription and support fees. In light of the Company's historical experience with meeting its service-level commitments, the Company does not currently have any liabilities on its balance sheet for these commitments. For single element sales agreements, subscription and support revenue is recognized ratably over the contract term beginning on the provisioning date of the contract. The Company recognizes professional services revenue using the proportional performance method for single element arrangements. Deferred Revenue Deferred revenue consists of billings or payments received in advance of revenue recognition, and is recognized as the revenue recognition criteria are met. The Company generally invoices its customers annually or in monthly or quarterly installments. Accordingly, the deferred revenue balance does not represent the total contract value of annual or multi- year, non-cancelable subscription agreements. Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current deferred revenue, and the remaining portion is recorded as non-current deferred revenue. bo Cost of Revenue Cost of revenue primarily consists of costs related to hosting the Company's cloud-based application suite, providing customer support, data communications expenses, salaries and benefits of operations and support personnel, software license fees, costs associated with website development activities, allocated overhead, amortization expense associated with capitalized internal use software, and acquired developed technology assets and property and equipment depreciation. Costs related to professional services are expensed as incurred. Deferred Commissions The Company capitalizes commission costs that are incremental and directly related to the acquisition of customer con- tracts. Commission costs are accrued and capitalized upon execution of the sales contract by the customer. Payments to partners and sales personnel are made shortly after the receipt of the related customer payment. Deferred commissions are amortized over the term of the related non-cancelable customer contract and are recoverable through the related future revenue streams. The Company capitalized commission costs of $70.4 million, $50.5 million, and $44.4 million during the years ended December 31, 2013, 2012, and 2011, respectively. Commission amortization expense was $55.5 million, $45.3 million, and $34.7 million during the years ended December 31, 2013, 2012, and 2011, respectively. 7. How does NetSuite account for commission payments to its salespeople? Is NetSuite accounting for commissions correctly? Provide citation from the codification. Provide example journal entries to properly account for commissions 5 Exhibit 4. Selected Footnotes from NetSuite Inc.'s Financial Statements Revenue Recognition The Company generates revenue from two sources: (1) subscription and support; and (2) professional services and other. Subscription and support revenue includes subscription fees from customers accessing its cloud-based application suite and support fees from customers purchasing support. Arrangements with customers do not provide the customer with the right to take possession of the software supporting the cloud-based application service at any time. For the most part, professional services and other revenue include fees from consultation services to support the business process mapping, configuration, data migration, integration, and training. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been mer. For the most part, subscription and support agreements are entered into for 12 to 36 months. In aggregate, more than 90% of the professional services component of the arrangements with customers is performed within 300 days of entering into a contract with the customer. The subscription agreements provide service-level commitments of 99.5% uptime per period, excluding scheduled maintenance. The failure to meet this level of service availability may require the Company to credit qualifying customers up to the value of an entire month of their subscription and support fees. In light of the Company's historical experience with meeting its service-level commitments, the Company does not currently have any liabilities on its balance sheet for these commitments. For single element sales agreements, subscription and support revenue is recognized ratably over the contract term beginning on the provisioning date of the contract. The Company recognizes professional services revenue using the proportional performance method for single element arrangements. Deferred Revenue Deferred revenue consists of billings or payments received in advance of revenue recognition, and is recognized as the revenue recognition criteria are met. The Company generally invoices its customers annually or in monthly or quarterly installments. Accordingly, the deferred revenue balance does not represent the total contract value of annual or multi- year, non-cancelable subscription agreements. Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current deferred revenue, and the remaining portion is recorded as non-current deferred revenue. bo Cost of Revenue Cost of revenue primarily consists of costs related to hosting the Company's cloud-based application suite, providing customer support, data communications expenses, salaries and benefits of operations and support personnel, software license fees, costs associated with website development activities, allocated overhead, amortization expense associated with capitalized internal use software, and acquired developed technology assets and property and equipment depreciation. Costs related to professional services are expensed as incurred. Deferred Commissions The Company capitalizes commission costs that are incremental and directly related to the acquisition of customer con- tracts. Commission costs are accrued and capitalized upon execution of the sales contract by the customer. Payments to partners and sales personnel are made shortly after the receipt of the related customer payment. Deferred commissions are amortized over the term of the related non-cancelable customer contract and are recoverable through the related future revenue streams. The Company capitalized commission costs of $70.4 million, $50.5 million, and $44.4 million during the years ended December 31, 2013, 2012, and 2011, respectively. Commission amortization expense was $55.5 million, $45.3 million, and $34.7 million during the years ended December 31, 2013, 2012, and 2011, respectively. 7. How does NetSuite account for commission payments to its salespeople? Is NetSuite accounting for commissions correctly? Provide citation from the codification. Provide example journal entries to properly account for commissions 5