Earlier this year, Red Hat changed how it recognized revenues for some of its subscription agreements, after taking advice from its auditors, PricewaterhouseCoopers. Instead of recognizing revenue for subscription agreements on a monthly basis, revenue is now recognised on a daily basis over a particular contract's term. In addition, rather than recognizing revenue on the first day of a month, Red Hat will now recognize it on the last day. These changes have not proved popular with clients. This accounting change resulted in more than a dozen law firms looking for clients to file class-action suits against the Raleigh, N.C.-based Linux company. These new profits may help to smooth the situation over and keep investors happy.
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