Revenue Management: #1 What does it mean to "recognize" revenue?

Earning revenue isn't just about collecting cash from your customers. It's about recording the income correctly and consistently. Revenue recognition is the process of deciding when and how to record revenue in financial statements so that they reflect the true value after the goods or services are delivered.

​
Today's business models are more dynamic than ever. Subscriptions, long-term projects, bundled products, and usage-based pricing make it challenging to determine when a sale is truly earned.

​
We will be going through a series of posts on Revenue Recognition and how it works with different industries, starting with,

➤ What is revenue recognition?
➤ What are the principles behind the standards?

What is Revenue Recognition?

Revenue Recognition is an accounting principle that defines when and how businesses can record revenue in their books. It ensures revenue is reported only when the company has delivered the promised goods or service, not simply when a payment is received.

For instance, if a customer pays upfront for 12 months of service, the business cannot recognize all of that money immediately. It must recognize it gradually over the period the service is delivered.

To address these challenges, Accounting standards like IFRS 15 and ASC 606 were introduced.

​

​What Do IFRS 15 & ASC 606 Say?

Both IFRS 15 & ASC 606 are closely aligned. They denote that companies must recognize revenue when they satisfy their performance obligation, that is, when they deliver the promised goods or services fully to the customer.

The core principle is:

"Recognize revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled."

To make this consistent across industries, these standards use a five-step model.

​
This model helps businesses recognize revenue accurately by following a structured process. Each step ensures that income is recorded only when a company truly earns it by delivering the promise.

Steps	Description	Example
Step 1: Identify the Contract with a Customer	Confirm there is a legal, enforceable agreement with clear payment terms and obligations.	A software company signs a 12-month service contract with a client with proper terms and a clear payment schedule.
Step 2: Identify the Performance Obligations	Break the contract into separate performance obligations that provide unique values.	Contract includes access to software, onboarding support, and monthly training. These are distinct services and are treated separately.
Step 3: Determine the Transaction Price	Calculate the total expected payment, including any discount, bonus, or other variables.	The total contract worth is $12,000, but the customer gets a discount of $1000 for an annual payment upfront. The transaction price becomes $11,000 in this case.
Step 4: Allocate the Transaction Price to the Obligation	Distribute the transaction pricing across the performance obligation based on their standalone selling prices.	If software is usually sold for $9,000, support for $1500 and training for $1500, the $11,000 will be proportionally allocated to each of these.
Step 5: Recognize Revenue When (or As) Obligations Are Satisfied	Revenue is recorded either over time or at a point when the customer gains complete control of the product or service.	In case of software licensing and implementation, the revenue is recognized monthly over 12 months, but the onboarding is recognized as and when it's delivered.

 

This single contract shows how IFRS 15/ASC 606 helps businesses handle complexity like discounts, variable consideration, multiple deliverables and other aspects in recognizing revenue.

Ultimately, these standards require companies to:

• Recognize revenue only when the performance obligation is met.
  
• While selling services and goods together, consider them as individual deliverables.
• Allocate the total contract value fairly across all deliverables.
• Adjust discounts, bonuses, and other variable pricing.
• Provide an audit-ready document for how and when revenue is recognized.

The bottom line of revenue recognition is straightforward. But while computing, it doesn't look the same when you are dealing with different billing models and while handling hundreds of contracts/transactions.

In the next post, we'll look at where computing revenue recognition gets tricky with some real-time business scenarios. 

• Topic Participants

• Hari Hara Sudhan. S

  

• Sticky Posts

• Community Learning Series | Digest #5 — September 2020

  Dear customers, We're happy to bring you the September edition of our #CommunityDigest! Keep track of your subscription KPIs right from your smartphone: Last month, we enhanced our Android mobile app to help our customers get daily updates on their business health. We got to know from a lot of customers that this has made their job much more easier because they no longer have to keep a reminder to manually check on the previous day's revenue or activations. If you have not downloaded it yet, here's

• Community Learning Series | Digest #4 - August 2020

  Dear customers, We hope you're staying safe and healthy. I'm happy to bring you the fourth edition of our #CommunityDigest with some brand-new updates from us. 1. Daily Business Updates (for Android users) The Zoho Subscriptions Android app has got a cool new update: You can now get a push notification to your smartphone that lets you know how many activations and cancellations have taken place, and what's the net revenue for the previous day. The best part is, you can tell the app when exactly you

• Community Learning Series | Digest #3 - July 2020

  Dear customers, We hope you're staying safe and healthy. We're glad to bring you the July edition of our #CommunityDigest. New community members can view our previous newsletters here. This time, we have two major updates and three interesting topics for you: 1. Zoho Subscriptions Developer Community Since the inception of Zoho Subscriptions, our team believed that the recurring billing platform we provide should be able to offer an extensive API library that empowers businesses to automate most

• Introducing: Community Learning Series | Digest #1 - May 2020

  Dear customers, We hope you are staying safe and healthy. Helping businesses manage their customer subscriptions more efficiently has always been, and always will be, our goal at Zoho Subscriptions. We strongly believe this is possible if we grow together as a community and share what we know with each other. To nurture this shared learning experience, here is our brand-new Community Learning Series! ​ Welcome to the first edition of our digest! Each edition of our community digest includes guides

• Recent Topics

• Tip of the week #26: Import/ Export calendars in Zoho Calendar.

  Any calendar on the web or calendars that you create in any other calendar application can be imported in to Zoho Calendar. This will help you to add the events from the calendars that you import to your Zoho Calendar. You also have the option to export

• Removing calendar for zoho email group

  How do I make it so that an email group created in Zoho Mail does NOT have a calendar? I have a couple groups for our phone systems voicemails - one for each department. Voicemail recordings are sent to this groups email address so they have access to

• Tip of the week #27: Edit personal calendars in Zoho Calendar.

  In Zoho Calendar, the personal calendars you create can be edited to make changes you need to make. Edit a Personal Calendar The following changes can be made to the personal calendar by editing it: Calendar title Calendar color Reminders and Description

• Tip of the week #28: Show/ hide, enable/ disable and empty/ delete your calendars in Zoho Calendar.

  The popularity of online calendars has soared in recent years. It's used both for personal and professional reasons. Calendars have evolved into an effective productivity tool in our lives, from creating events for birthdays and anniversaries to scheduling

• Tip of the week #30: Share calendars publicly in Zoho Calendar.

  In Zoho Calendar, calendars that are created under My Calendars can be shared publicly. Making your calendar public allows others to view it. When you need to share your calendar with a larger group, public sharing can help. You can restrict others from

• Tip of the week #31: Share your personal calendars within organization.

  Keep your Organization members aware of what's happening. In Zoho Calendar, you can share your personal calendar with all the members in your organization using the Share with org option.When you enable org sharing for a particular personal calendar,

• Tip of the Week #33: Appointment scheduler in Zoho Calendar.

  In Zoho Calendar, you can use the Schedule Appointment option to share your appointment request form with the public, allowing people to fill out the form to request an appointment with you. This form can be embedded on your website or blog. Visitors

• Tip of the Week #34: Embed Calendars using Zoho Calendar

  You can make your calendars public and visible to the general public by embedding them in your websites/blogs using Zoho Calendar. You can use the embed code to add your own calendars to your website's/ blog's HTML code, and the calendar will appear on

• Tip of the week #35: Migrate to Zoho Calendar from Google Calendar.

  If you are looking to move your Google Calendar events to Zoho Calendar, never worry about missing out the events from your Google Calendar. You can migrate the events from Google Calendar using the export option and import it to Zoho Calendar and manage

• Tip of the week #36: Migrate to Zoho Calendar from Outlook Calendar.

  If you've been using Outlook calendar and looking to migrate to Zoho Calendar, you can seamlessly export your calendars from Outlook and import them into Zoho Calendar without losing any events, participants, and the reminders set for each event. To migrate

• Shared calendar issues and duplications

  Apparently there was a calendar update?  Now when I schedule an event for a team member that has shared his calendar with me, the event makes me the organizer and adds the event to my calendar as well.  Previous to this "update" I would scheduled an event

• Subscribed Calendar

  Hi i have subscribed to a calendar for Holidays in Canada it shows all the holidays perfectly but every one of them has the word Canada before the rest of the name is there a way to remove that word Canada? It takes up a lot of space in the square on

• The year that was at Zoho Calendar 2023- Part 1

  Hello, amazing community members! Happy new year from all of us here at Zoho Calendar. As we begin the new year, we'd like to thank each and everyone of our community members for your unwavering support and love that you have shown for Zoho Calendar.

• Zoho Calendar 2024: A Year in Review

  Hello, community members! Happy new year from all of us here at Zoho Calendar. As we turn the page to a new year, we extend our heartfelt gratitude to every member of our Zoho Calendar community for your continued support and enthusiasm. Your feedback

• Zoho Calendar not syncing correctly with personal Google Calendar

  Coming to this forum as Zoho Calendar support team is not responding, any more. For the past 8 weeks, I have been having an issue with Zoho Calendar not syncing with my personal Google Calendar correctly. I subscribed to Zoho Calendar iCal in my personal

• MTA - BAD IP reputation by outlook/hotmail

  Messages to Microsoft email servers are bouncing back due to poor reputation. Message: 4.7.650 The mail server [136.143.188.206] has been temporarily rate limited due to IP reputation. For e-mail delivery information see https://postmaster.live.com (S775)

• Zeptomail API error 500 internal server error

  Hi Everyone, getting this eror continuously! Can anyone please guide around the same! Zeptomail API error 500 internal server error Best Regards

• Waiting multiple days to buy credits, causing my website to suffer

  So I own a fairly large website that gets a lot of registered users. I use transmail send activation emails, and also forgot password emails. I sent an email to zoho's presales team when I was only at 4K/10K emails sent, hoping to buy more credits before

• Follow up

  Hello, I sent a message 2 days ago but I don't receive any response and I cannot find my ticket here. this is the ticket: Your ticket has been created with the ticket ID 68925465 and subject "Fwd: Fishing-alert" looking forward to seeing your response.

• What's new in TransMail!

  Note: TransMail is now ZeptoMail. Click here to know more. Hello again, everyone! We've recently crossed the 6 months mark of TransMail's launch. In this time post our launch, we have been constantly working on updating our platform and adding new features

• June 2021 in TransMail!

  Note: TransMail is now ZeptoMail. Click here to know more. Hello again, everyone! Hope you and your loved ones are doing well. If you're doing less than fine, we truly hope that things only get better for you.  We've had a few updates in the past month

• TransMail has a new name—ZeptoMail!

  Tried navigating to TransMail's community forum but see a different name now? That's because TransMail has a new name. TransMail is now ZeptoMail! As we’ve grown from an internal service used mainly by other Zoho products to an up-and-coming competitor

• July 2021 in ZeptoMail!

  Note: TransMail is now ZeptoMail. Click here to know more. Hello again, everyone! Hope you and your loved ones are doing well.  We've had a few updates in the past month in ZeptoMail—some new features and some important announcements. Take look at what

• Send Email From the ZeptoMail BY API

  What is Zeptomail:- Transactional email service with reliable and fast delivery How we can Create a Connection for Zeptomail in Zoho CRM Go to the Setup Click on Connection Enter Connection Details:- Generate Consumer Key & Consumer Secret Using Zoho

• Customer email on Opencart 3

  When I place an order, 2 emails are sent: 1) administrator 2) to the user The administrator receives a beautiful letter, but the user receives a damaged letter (see screenshot). What could be the problem?

• [Announcement] Insert image from URL changes in Zoho Writer

  Hi Zoho Writer users! We'd like to let you know that we've changed the behavior of the Insert image from URL option in Zoho Writer for security reasons. Earlier behavior Once you inserted an image URL in a Writer document, the image would be fetched from

• Dynamic Signature - Record owner

  Hi everyone, I’m using Zoho Writer merge templates from Zoho CRM and have two questions: Owner signature: How can I automatically insert the CRM record owner’s signature in the merged document? I’m not sure where this signature is stored or how to reference

• Writer sing up problom

  Zoho writer sing up prolom face

• Unable to copy into a new document

  Whe I create a new Writer doc and attemp to copy and past I get this message. The only way to copy into a document is I duplicate an existing document, erase the text and save it under a different name and then paste the information. Not ideal. Can you

• [Webinar] Live demos and user Q&A with Zoho Writer product experts

  Join us on June 12, 2025 for live demos based on your use cases and real-world scenarios raised via form. This is also an opportunity to get your questions answered directly by product experts from the Zoho Writer team. Webinar agenda Live demos based

• Zoho Writer's built-in citation and bibliography generator

  Hey researchers and writers! Do you manually format citations and bibliographies, spending hours jumping between apps and tabs? If so, then check out Zoho Writer's built-in "Citations and Bibliography" feature. Imagine you're writing a thesis on the future

• Single and group checkboxes in Zoho Writer's fillable forms

  Hey Writer Fam, Are you making the most out of single and group checkboxes in fillable forms in Zoho Writer? Here is a handy tip to optimize your use of checkboxes, both single and group, and enhance your data collection process. Single checkboxes: Single

• Collaborate efficiently with Zoho Writer's track changes feature

  Hi Zoho Writer Community, Zoho Writer's track changes feature is a simple, built-in solution that helps you and your team work together efficiently. Instead of juggling multiple versions of a document or building up a long email chain of comments, each

• Zoho Writer's WordPress extensions

  Hey Zoho Writer users! Say goodbye to all your WordPress content publishing woes with Zoho Writer's WordPress extensions. Publish content with all your formatting and images, republish content when you update a document, and more—from a single window

• Time-saving table hacks

  Hey Zoho Writer Community, Do you find yourself using a lot of tables in your documents? We're here to share some of our time-saving hacks that will help you work more efficiently, organize your data, and make your documents look neat and professional.

• Automating document approval and signing with Zoho Writer and Zoho Sign

  Hey Zoho Writer Community! Here's another automation tip to make your processes more efficient! Question: Can I send a document for client approval first, then automatically send it for signing with Zoho Sign if they approve? Since it's the same person

• Customization hacks in Zoho Writer - Part 2

  Hey community, We're back with some more tricks to personalize your documents, save time, and get in the zone when you work in Writer. Check out part 1 of this post if you haven't already. Let's dive right in! Document ruler units Imagine you're creating

• Simplify your tax calculations with Zoho Writer

  Hello Zoho Writer Community! Tax season can be stressful, but with Zoho Writer, managing your income tax calculations becomes straightforward and efficient. Here’s an example of how you can use the tables and formulae of Zoho Writer to calculate income

• Enhance document navigation with headings and TOC

  Hey Zoho Writer Community! We're back with some useful features in Zoho Writer that can simplify your document creation and navigation process. Let's dive right in! Check out our video on how to make the most of Zoho Writer's heading and table of contents

• Use and download in PDF format of Zoho wirter Merge template using deluge

  Hello Zoho Developers. Here is some information about Zoho Writer. Writer is not just another online word processor, it's a powerful tool for editing, collaboration, and publishing. Even with its wide range of features, Writer's pared-down user interface

• Next Page