Table of Contents WEWORK COMPANIES INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2019 (UNAUDITED) reporting periods beginning after January 1, 2019 are presented under ASC 606 while prior period amounts are not adjusted and continue to be reported in accordance with Topic 605. Other than the policies discussed below, and as otherwise discussed in Note 2, no material changes have been made to the Company’s significant accounting policies disclosed in Note 2, Summary of Significant Accounting Policies, in its Annual Report for the year ended December 31, 2018 as it relates to revenue recognition. The Company recognizes revenue under the five-step model required under ASC 606, which requires the Company to identify the relevant contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations identified and recognize revenue when (or as) each performance obligation is satisfied. The Company’s primary revenue categories, related performance obligations, and associated recognition patterns are as follows: Membership and Service Revenue—The Company sells memberships to individuals and organizations that provide access to office space, use of a shared internet connection, access to certain facilities (kitchen, common areas, etc.), a monthly allowance of conference room reservation hours, printing and copying and access to the WeWork mobile application. The price of each membership is based on factors such as the particular characteristics of the workspace occupied by the member, the geographic location of the workspace, and the size of the workspace. The membership contracts may contain renewal options that may be exercised at the discretion of the member to extend the term beyond the initial term. Membership revenue consists primarily of fees from members, net of discounts, and is recognized over time, evenly on a ratable basis, over the life of the agreement, as services are provided and the performance obligation is satisfied. All services included in a monthly membership allowance that remain unused at the end of a given month expire. Certain of the Company’s membership contracts with its members relate to “configured” workspaces which meet the definition of operating leases under ASC 840 and 842. The Company had approximately $20 million and $109 million in membership revenue for the six months ended June 30, 2018 and 2019, respectively, related to subleases and membership contracts accounted for as leases in accordance with ASC 840 during 2018 and ASC 842 during 2019. The Company has elected not to separate non-lease components from lease components for all membership agreements with configured workspaces. The revenue recognized under ASC 842 is recognized evenly on a ratable basis over the term of the arrangement, consistent with the revenue recognition pattern for the membership services arrangements accounted for under ASC 606. Service revenue consists of additional billings to members for the ancillary services they may access through their memberships in excess of monthly allowances included in membership revenue, commissions earned by the Company on various services and benefits provided to our members and management fee income for services provided to unconsolidated locations in India. Members may elect whether they want to add-on additional services at the inception of their agreement. Additional fees for add-on services are included in the transaction price when elected by the member. To the extent a member elects an add-on service subsequent to the commencement of a commitment period, the additional add-on fee will be added to transaction price at that point in time. Other Revenue—Other revenue includes income generated from sponsorships and ticket sales from WeWork branded events and is recognized upon the occurrence of the event. Other revenue also includes other management and advisory fees earned, design fees earned and revenue generated from various We Company offerings. The Company recognizes these revenues over time, on a monthly basis, as the services are performed. Other revenue also includes revenue earned for design and development services performed, which are recognized as revenue over time based on a percentage of contract costs incurred to date compared to the total estimated contract cost. The Company identifies only the specific costs incurred which contribute to the Company’s progress in satisfying F-85