Deferred Revenue Under ASC 606: The Basics for SaaS and Services
Under ASC 606 (and IFRS 15, which is nearly identical here), you recognize revenue when you deliver what the customer paid for. If you invoice before delivering, the difference is a contract liability — deferred revenue. If you deliver before invoicing, it's a contract asset (often called unbilled revenue or unbilled receivables).
Subscriptions
A SaaS subscription is a service delivered evenly over time, so revenue is recognized ratably over the service period. A $12,000 annual plan starting March 15 earns about $32.88 per day; at September 30, $5,424.66 is still deferred.
| Month | Days | Revenue (daily) | Deferred at month-end |
|---|---|---|---|
| Mar 2026 | 17 | $558.90 | $11,441.10 |
| Apr 2026 | 30 | $986.31 | $10,454.79 |
| May 2026 | 31 | $1,019.17 | $9,435.62 |
| Jun 2026 | 30 | $986.30 | $8,449.32 |
| Jul 2026 | 31 | $1,019.18 | $7,430.14 |
| Aug 2026 | 31 | $1,019.18 | $6,410.96 |
| Sep 2026 | 30 | $986.30 | $5,424.66 |
| Oct 2026 – Mar 2027 | 189 | $5,424.66 | $0.00 |
Setup and onboarding fees
If onboarding is a distinct service the customer benefits from on its own, recognize it when delivered (DeferSheet's “point” method). If it isn't distinct — it only makes sense with the subscription — it's generally spread over the subscription term, or longer if the customer is expected to renew. This is a judgment call; agree it with your accountant.
Billing in arrears
A retainer billed after the month ends creates unbilled revenue at month-end, not deferred revenue. DeferSheet shows it in the unbilled column and books it in the journal entry.
Net per contract
A contract is presented as either a net liability or a net asset, never both. DeferSheet nets every line (including credit notes) per contract, or per customer when there's no contract column, before summing deferred and unbilled balances.
This is a general explanation, not accounting advice. Variable consideration, multiple performance obligations, usage-based pricing and contract modifications need more analysis than a schedule tool can do.