Software As A Service Revenue Recognition. Those companies with software license revenue will be most affected while there is likely a lesser impact on the recognition of software-as-a-service SaaS revenue. Revenue recognition within the software industry has historically been highly complex with much industry-specific guidance.
Revenue recognition is a generally accepted accounting principle GAAP and a fundamental aspect of the accrual basis of SaaS accounting you should only record revenue when you have completed a revenue generating process. SaaS revenue recognition is an ongoing priority for SaaS accounting teams. Software companies often have arrangements with customers that include multiple components wrapped into one contract with a customer.
The ASC 606 revenue recognition standard affects entities differently as they have moved from implementation to applying and disclosing the effects on their financial statements.
No matter when a customers cash arrives in your bank account you dont count it as revenue until you have delivered the product or service that it paid for. He mentioned that this contract would significantly increase his sales during the current year. There are some common themes and questions for organizations in the software and software-as-a-service SaaS sectors to explore in our Technology Alert series. 5 Recognize revenue when or as the entity satisfies a performance obligation DobarTech will recognize revenue as it satisfies each performance obligation either at a point in time or over time.