{"id":10701,"date":"2023-03-29T15:24:50","date_gmt":"2023-03-29T19:24:50","guid":{"rendered":"https:\/\/www.sage.com\/en-us\/blog\/?post_type=sage_glossary&p=10701"},"modified":"2024-08-20T01:37:06","modified_gmt":"2024-08-20T05:37:06","slug":"what-is-subscription-revenue-accounting","status":"publish","type":"sage_glossary","link":"https:\/\/www.sage.com\/en-us\/blog\/glossary\/what-is-subscription-revenue-accounting\/","title":{"rendered":"What is subscription revenue accounting?"},"content":{"rendered":"
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\n\t\t\t\t\t\t\tGlossary definition<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t
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\n\t\t\t\t\t\tWhat is subscription revenue accounting?\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t\t
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Companies who use a subscription model and SaaS subscription accounting software<\/a> to bill customers must follow specific revenue recognition rules.. Subscription revenue accounting requires revenue to be calculated differently than traditional businesses. It’s based on the interval at which the supplier has met its implicit and explicit performance obligations and at which customers pay open invoices.<\/p>\n\n\n\n

Updated subscription revenue accounting requirements were put into place in 2019. These requirements are often referred to as ASC 606 revenue recognition requirements and they are broken down into five steps. <\/p>\n\n\n\n

These five steps are:<\/p>\n\n\n\n

\u2022 Step 1: Identify the contract with a customer
\u2022 Step 2: Identify the performance obligations in the contract
\u2022 Step 3: Determine the transaction price
\u2022 Step 4: Allocate the transaction price
\u2022 Step 5: Recognize revenue when or as the entity satisfies a performance obligation<\/p>\n\n\n\n

Common ASC 606 Definition Questions:<\/h2>\n\n\n\n

What is a performance obligation?<\/p>\n\n\n\n