Revenue Recognition controls examples
Amortization granularity
This example uses the following assumptions:
- On January 25th, at 00:00:00 UTC, 2022, a customer starts a 4-month subscription that costs 120 USD.
- The subscription generates an invoice.
- The invoice finalizes and the customer pays 120 USD.
In this example, the invoice and revenue periods are from Jan 25, 2022 to May 25, 2022. The 120 USD is recognized across 7 days in January, 28 days in February, 31 days in March, 30 days in April, and 24 days in May. We can use this example to demonstrate the differences between our supported amortization methods:
If you looked at the summary after May ends, amortization by millisecond applied, you might see something like:
Account | Jan | Feb | Mar | Apr | May |
---|---|---|---|---|---|
Revenue | +7.00 | +28.00 | +31.00 | +30.00 | +24.00 |
DeferredRevenue | +113.00 | -28.00 | -31.00 | -30.00 | -24.00 |
If you looked at the summary after May ends, amortization by month evenly applied, you might see something like:
Account | Jan | Feb | Mar | Apr |
---|---|---|---|---|
Revenue | +30.00 | +30.00 | +30.00 | +30.00 |
DeferredRevenue | +90.00 | -30.00 | -30.00 | -30.00 |
If you looked at the summary after May ends, amortization by month evenly, first and last month prorated applied, you might see something like:
Account | Jan | Feb | Mar | Apr | May |
---|---|---|---|---|---|
Revenue | +7.00 | +29.66 | +29.66 | +29.68 | +24.00 |
DeferredRevenue | +113.00 | -29.66 | -29.66 | -29.68 | -24.00 |
Catch-up revenue
This example uses the following assumptions:
- On November 1st, 2022, at 00:00:00 UTC, a customer is billed for an invoice that costs 92 USD.
- The invoice has service periods from Oct 1, 2022 to Jan 1, 2023 for all of its line items.
- The invoice finalizes and the customer pays 92 USD.
In this example, the service period for the transaction begins prior to the invoice finalization, triggering the catch-up revenue effect. We can use this example to demonstrate the differences between enabling and disabling catch-up revenue.
After December ends, with catch-up revenue enabled, the summary might look like:
Account | Nov | Dec |
---|---|---|
Revenue | +61.00 | +31.00 |
DeferredRevenue | +31.00 | -31.00 |
After December ends, with catch-up revenue disabled, the summary might look like:
Account | Oct | Nov | Dec |
---|---|---|---|
Revenue | +31.00 | +30.00 | +31.00 |
DeferredRevenue | +31.00 (= +61.00 + -30.00) | -31.00 | |
UnbilledAccountsReceivable | +31.00 | -31.00 | |
AccountsReceivable | +92.00 |