MRR (Monthly Recurring Revenue) and revenue recognition are two key concepts for assessing the financial performance of companies that rely on recurring subscriptions. Although they both measure recurring revenue, their calculation method differs, in particular regarding proration and the way MRR is calculated at the end of each month.

MRR (Monthly Recurring Revenue)

MRR represents the sum of the monthly revenue generated by active subscriptions at a given moment. The MRR of a period is calculated from the subscriptions active at the end of that period.

Calculating MRR

MRR is calculated from the invoice lines and the period of each subscription. The formula used is:

MRR = Σ (Monthly value of each active subscription)

i.e.

MRR = Σ (Subscription amount excluding tax / Subscription duration in months)

Each subscription is converted into a monthly value by dividing the total amount of the subscription by its duration in months. For example, an annual subscription of €1,200 has a monthly value of €100 (€1,200 ÷ 12 months).

Practical examples:

• Monthly subscription: A €50 per month subscription, active from February 7th to March 7th, contributes €50 to the MRR for the month of February.
• Annual subscription: A €1,200 subscription over 12 months, active from January 15th to January 15th of the following year, contributes €100 to the MRR for each month, from the start to the end of the period.
• Quarterly subscription: A €450 subscription for 3 months, active from January 10th to April 10th, contributes €150 to the MRR during the period from January to March.

Proration and calculation of contributions

MRR is not prorated: this means that the entire value of a subscription is counted as soon as the subscription is active, even if it starts or ends in the middle of the month.
Example: A customer subscribes for €100 per month on March 15th. The MRR for March will include the subscription in full, even though the subscription only starts halfway through the month.

Revenue recognition

Revenue recognition follows strict accounting rules and consists of recognizing revenue when it is actually generated, i.e. when a service is provided. Unlike MRR, revenue recognition is prorated, which means it is calculated according to the period during which the service was actually provided.

Calculating recognized revenue

The formula for calculating the recognized revenue for a subscription is as follows:

Recognized revenue = Subscription amount × (Days of service in the month / Total number of days in the month)

Proration example: If a customer takes out a €100 subscription on March 15th for a one-month period, the recognized revenue for March will be €50 (because the subscription covers 15 days in March: €100 × (15/31)).

If the subscription renews for April, the recognized revenue for April would be €100, because the subscription covers the whole month. Then €50 for the month of May if it does not renew.

Key differences between MRR and revenue recognition

• MRR measures recurring revenue based on the subscriptions active at the end of the month. It is calculated without proration: if a subscription starts in the middle of the month, its full amount is counted for that month.
• Revenue recognition, on the other hand, is prorated: it adjusts the amounts according to the actual duration of the subscription in each month.

Summary of the differences:

Updated on: 03/07/2026