Revenue Recognition

Introduction

Recurly has two revenue recognition solutions:

• A new improved enterprise solution ideal for companies with complex revenue recognition requirements (e.g. companies that ship physical goods, companies that operate in multiple currencies, companies with complex revenue models, or companies that need to adhere certain compliance standards such as ASC 606)
• A legacy solution ideal for companies with straight-forward revenue recognition requirements (e.g companies that provide a digital service over a period of time and follow straight line revenue recognition rules).

Enterprise Solution

Recurly’s enterprise revenue recognition solution is a cloud-based, automated revenue management SaaS application, built with the purpose to automate revenue recognition for public and private companies as they comply with FASB (ASC 606/340-40/842) and IASB (IFRS 15) guidelines. Recurly’s enterprise solution is designed to dramatically improve and streamline the revenue reporting & month end close process for companies with complex revenue models and/or need to comply with formal compliance standards such as ASC 606)..

How it works:

• Step 1. Configuration: Work with Recurly’s professional services team to configure the revenue recognition rules your business requires. Any special considerations that require carve-outs or additional steps can be automated through this configuration process.
• Step 2: Work with Recurly’s professional services team to connect your Recurly Subscription Billing and Management instance to your Recurly Revenue Recognition instance so the necessary data (e.g. invoices) can sync between the two systems.
• Step 3. Recurly Revenue Recognition automatically ingests invoices and transactions, categorizes them, and then assigns the appropriate revenue recognition action based on the rules and configurations defined in step 1. Revenue schedules are automatically created as well as various revenue forecasting scenarios which you and your teams can access for review.

Key Features

Recurly’s enterprise revenue recognition solution includes the following key features:

• ASC 606, IFRS 15, ASC 340-40, ASC 842 & IFRS 16 compliance
• “Revenue Close Process” automation
• Contract Modification Rules that automate complicated one-off scenarios
• Automation support for multiple revenue model types (consumption, usage, milestone, percentage of completion, and delivery models)
• Revenue Insights & Forecasting
• Audit precision and accuracy
• Fully configurable revenue management experience
• Multicurrency & Multi-book capabilities
• Lease Accounting & Expense Accounting support
• Advanced VC (variable considerations) & SSP (standalone selling price) automation

Pricing & More Information

Recurly Revenue Recognition is available only on the Elite edition of Recurly and is sold as a separate add-on that includes a professional services engagement and separate licensing fees . For more information on getting started with this revenue recognition solution, please contact us.

Legacy Solution

Recurly’s revenue recognition produces a revenue schedule export to expedite the revenue accounting process. Please be advised that the legacy solution is no longer available for purchase, but we will continue to support existing users without interruption. We recommend new merchants use our more robust new Recurly Revenue Recognition.

Disclaimer:

• Our basic solution is not an accounting or ERP system. It only provides raw data to help you more easily compute the amount of revenue you can recognize.
• Please speak with your accountant before using our basic solution as they can provide you with advice on correct accounting practices.
• We recommend not changing your revenue recognition type for subscription changes via the API as this can result in invoices being reassigned to a different revenue recognition method.

Legacy solution revenue recognition methods

Recurly offers six different ways a merchant's revenue can be recognized through its basic solution::

1. Evenly (distributed evenly over the date range of the charge)
2. At Invoice Creation Date
3. At Charge Range Start
4. At Charge Range End
5. Recognize at Charge Date
6. Do not Recognize Revenue (exclude charges from rev rec export)

You can set revenue recognition rules on the plan, setup fee, add on, one-time charge, credit, and subscriptions objects.

When an invoice is created, Recurly calculates the deferred revenue waterfall and creates revenue schedules for each charge or credit and provides a revenue amortization report through an export.

Evenly Distributed

Revenue for a charge is recognized evenly over the range of time specified. This option is most common for services provided over a period of time (i.e. SaaS, OTT).

A merchant may choose to recognize revenue evenly by day over a set period of time. As an example, let's use Kale Software. Kale Software is a SaaS organization that provides access to a suite of analytics tools. Kale offers many Plans, Add Ons, and Setup Fees to its customers for its SaaS service. Kale Software also charge customers outside the scope of a subscription for non-recurring charges such as professional services.

Example 1: one-month subscription:

On July 26th, Customer A signs up for Kale Software's "Gold Plan", which costs $30 a month, has a Setup Fee of $10, and one Add On for $5. Customer A purchases the recurring "Gold Plan", and the optional Add On. Revenue for the Plan and AddOn will be recognized evenly over the date range of each month's invoice, which is determined by the subscription period. Since this subscription started on July 26, revenue will be recognized over the period billed, in this case July 26 to August 26. A portion of the revenue will be recognized each day, so revenue will appear in the export for both July and August on this charge. Revenue for the Setup Fee is recognized evenly only over the first month's invoice period since it is not recurring.

An image of the plan page to configure revenue recognition is below:

An invoice for this example is below:

Example 2: one-time charge recognized evenly over time:

On July 15th, Kale Software creates a one-time charge with a date range of March 1st - August 1st, selecting the option to recognize revenue evenly. Revenue for this charge will be recognized evenly for each day in the range of March 1st to August 1st.

The revenue schedule export for this charge will appear like this:

At Invoice Creation

Revenue for a charge is recognized at the time the invoice is created. This option is available for one-time charges.

Example 1: creation date and invoice date are different:

On July 15th Kale Software creates a one-time charge for August 10th, selecting the option to recognize revenue at invoice creation time, then generates an invoice. Revenue for this charge will be recognized on July 15th.

Example 2: creation and invoice date are the same:

On July 15th Kale Software creates a one time charge for June 10th, selecting the option to recognize revenue at invoice creation time, then generates an invoice on July 15. Revenue for this charge will be recognized on July 15th.

At Charge Range Start:

Revenue for a charge is recognized at the start of the charge date range.

Example 1: date range in the future:*

On July 15th, Kale Software creates a charge the date range of August 10th - September 10th, selecting the option to recognize revenue at the start of the charge range. Regardless of when the invoice is created, revenue from this charge will be recognized on August 10th.

Example 2: date range in the past:

On July 15th, Kale Software creates a charge the date range of March 1st - May 1st, selecting the option to recognize revenue at the start of the charge range. Regardless of when the invoice is created, revenue from this charge will be recognized on March 1st.

At Charge Range End:

Revenue for a charge is recognized at the end of the charge date range.

Example 1: date range in the future:

On July 15th, Kale Software creates a charge the date range of August 10th - September 10th, selecting the option to recognize revenue at the end of the charge range. Regardless of when the invoice is created, revenue from this charge will be recognized on September 10th.

Example 2: date range in the past:

On July 15th, Kale Software creates a charge the date range of March 1st - May 1st, selecting the option to recognize revenue at the end of the charge range. Regardless of when the invoice is created, revenue from this charge will be recognized on May 1st.

Recognize at Charge Date

On July 16, Kale Software receives a request to deliver a physical hard disk to a customer, with the terms that payment will be made when the physical hard disk is received at the customer's office. Kale ships the hard disk on July 16 and receives confirmation that the hard disk will be received by the customer on July 18.

Kale issues the invoice with an Invoice Date of July 18 and a Charge Date of July 18, and uses the option to recognize revenue on July 18 (the charge date). Regardless of when the invoice was issued, revenue for the hard disk shipment will be entirely on July 18, when the disk is received by the customer.

Export Details

See Exports - Revenue Recognition for information about the .csv generated with revenue schedule data.

See Exports - Revenue Recognition for information about the .csv generated with revenue schedule data.

Gift Cards

If you use Recurly's Gift Subscriptions feature, there are important considerations to make for revenue recognition. Recurly does not include invoices for gift card purchases in our revenue recognition export. When the gift card is redeemed, the gift card will act as payment for the invoice. The resulting invoice will appear the same as other invoices in our revenue recognition export.

Pricing & More Information

Legacy Recurly Revenue Recognition is no longer available for purchase.

*Note: This documentation and the export itself are intended to provide best practice guidelines. Recurly is not an accounting firm, and the foregoing should not be construed as accounting advice. You should consult with an accountant before setting up any accounting policies or procedures.