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Revenue recognition methodology

Learn how revenue recognition is modeled within Stripe and how it maps to your integration.

Understanding how Stripe generates revenue recognition information enables you to use our tooling more efficiently. It can also help you reconcile financial information between Stripe and any data that you store on your end.

Revenue recognition modeling

The list below outlines the parameters and data that Stripe uses to calculate revenue.

  • Only data sent to Stripe is used for reporting. This means that revenue activity tracked outside of Stripe is not represented in revenue recognition reports.
  • Timing
    • All events are calculated using UTC time.
    • Reports are available three days after the end of a month.
  • Integration
    • You must set taxes and discounts using the default_tax_rates and discount attributes. If you set taxes and discounts as line items instead, Stripe can’t differentiate the values from revenue, which generates inaccurate reports.
    • Only exclusive tax rates set in the tax field are processed.
  • Accounting assumptions
    • Revenue is recognized by the millisecond and is used to calculate a monthly amount that’s distributed evenly over the service period covered by an invoice.
    • Revenue is calculated evenly over the invoice item periods that you set when you create subscriptions. For example, prorations that have service periods that start before they are invoiced are recognized.
    • Recognizable revenue is reported as a net of discounts. For example, an invoice for 50 USD with a 10 USD discount has a recognizable portion of 40 USD.
    • Taxes are not recognizable. ​For example, an invoice for 50 USD with a tax of 5 USD has 50 USD in recognizable revenue and a tax liability of 5 USD. This makes the invoice and accounts receivable totals 55 USD.
    • Revenue recognition reports use invoice item periods that you set when you create subscriptions. Revenue is immediately recognized for payments processed by Stripe that do not go through Stripe Billing and for invoices without an invoice item period set.
    • Partial refunds and disputes are distributed evenly.
  • Multi-currency
    • All events are calculated based on your account’s settlement currencies.
    • Events with presentment currencies that are unsupported as settlement currencies are exchanged into your account’s default currency.
    • Finalized invoices calculate amounts with an assumed exchange rate at the time of finalization. Upon payment, the resulting balance transaction dictates the final exchange rate. Any differences between assumed and final rates are added to the FxLoss account.
    • Unbilled invoice items fluctuate based on current market rates.

Revenue recognition requirements vary based on a number of factors and the parameters listed above may or may not fit your business. You need to ensure that you understand and comply with the requirements applicable to your business, and that you model your business accordingly.

Report terminology

Revenue recognition reports contain a broad set of information. This includes the accounts that are debited or credited as part of your business activity. To get the most value out of the reports, it helps to understand what accounts are tracked, the type of debits and credits that impact those accounts, and the events that trigger these activities.

Account Debit/Credit type Report Description
RevenueRevenue (credit)Income statementRecognizable portion of finalized invoices that count towards revenue during the month. For example, if an invoice line item is for 90 USD with 10 USD in taxes, the total invoice is 100 USD, but the recognizable portion is only 90 USD.
RefundsContra Revenue (debit)Income statementPortion of the refunded amount previously recognized. For example, if you issue a 120 USD refund on an annual subscription during the second month, 20 USD for the first two months is contra revenue. The remaining 100 USD is adjusted and reflected in your deferred revenue balance in the balance sheet.
DisputesContra Revenue (debit)Income statementPortion of the disputed amount previously recognized. For example, if there’s a 120 USD dispute on an annual subscription during the second month, 20 USD for the first two months is contra revenue. The remaining 100 USD is adjusted and reflected in your deferred revenue balance in the balance sheet.
CreditNotesContra Revenue (debit)Income statementPortion of the credit note amount previously recognized. For example, if there’s a 120 USD dispute on an annual subscription during the second month, 20 USD for the first two months is contra revenue. The remaining 100 USD is adjusted and reflected in your deferred revenue balance in the balance sheet.
BadDebtContra Revenue (debit)Income statementPreviously recognized revenue from invoices that have been marked as uncollectible.
VoidsContra Revenue (debit)Income statementPreviously recognized revenue from invoices that have been voided.
UnbilledVoidsContra Revenue (debit)Income statementPreviously recognized revenue from invoice items that have been deleted. These items are sometimes deleted when they generate unbilled accounts receivable and revenue.
CustomerBalanceAdjustmentsExpense (debit)Income statementExpenses incurred due to manual adjustments to a customer credit balance.
UnderpaymentsExpense (debit)Income statement Expenses incurred due to underpayment from push payment methods.
RecoverablesGains (credit)Income statementRecovered funds that are not attributable to revenue. For example, if there’s a 120 USD dispute on an annual subscription during the second month, 20 USD for the first two months is contra revenue and the remaining 100 USD is adjusted from the deferred revenue balance. If you win the dispute and 120 USD is returned to you, 20 USD is reflected as revenue and the remaining 100 USD is reflected as recoverables.
FxLossLoss (debit)Income statementTotal loss due to foreign currency exchange rates.

Event mapping

There are a few events that trigger debits and credits. Understanding these events can help you understand how revenue flows through your business.

EventImpact on revenueDebit typeCredit type
Invoice is finalizedRevenue is recognizedAccountsReceivableDeferredRevenue
Revenue from metered billing is recognizedAccountsReceivableRevenue
Taxes are not recognizedAccountsReceivableTaxLiability
End of the monthTotal amount recognizedDeferredRevenueRecognizedRevenue
Customer pays invoiceNo recognitionCashAccountsReceivable
Charge refunded or disputedPortion already recognizedRefunds, DisputesCash
Portion not recognized yetDeferredRevenueCash
Tax portionTaxLiabilityCash

Reversals in debits and credits like DebitDeferredRevenue or CreditAccountsReceivable, are due to negative invoice items. These are often caused by prorations.

Next steps

Review some examples to better understand revenue recognition and our tooling.

  • Revenue Recognition Examples
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Revenue recognition modeling
Report terminology
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Next steps