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# How revenue recognition, deferred revenue, and accrued revenue work

To calculate the revenue recognized over a given period (a month, a quarter, a year), as well as the amounts of deferred revenue and accrued revenue at the end of that period, we first calculate separately the individual contributions of each invoice line to these different elements before aggregating them.

# Definition of 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.

### a) For a one-off invoice line

**Contribution to revenue over the period:**

A one-off invoice amount is recognized in revenue if the issue date of that invoice falls within the analyzed period.

| Recognized revenue = Invoice amount

### b) For a recurring invoice line

**Contribution to revenue over the period:**

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

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# Contribution to accrued and deferred revenue

|| Note: One-off invoices do not generate deferred or accrued revenue; only subscription invoices contribute to them.

| Conditions | Deferred revenue | Accrued revenue |
| ---- |
| Invoice issue date < End of the service period | Invoice line amount excl. tax – cumulative recognized revenue* | 0 |
| Invoice issue date > End of the service period | 0 | Cumulative recognized revenue* |

**Cumulative recognized revenue = cumulative value of the contributions over all the periods preceding the considered period (inclusive).*