How revenue recognition, PCA and FAE work

Master revenue recognition with Fincome. Learn how to manage PCA and FAE amounts for accurate and compliant accounting.

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

1. Definition of revenue recognition

Revenue recognition follows strict accounting rules and consists of recognizing revenue when it is actually earned, that is, when a service is provided. Unlike MRR, revenue recognition is prorated, which means it is calculated based on the period during which the service was actually provided.

a) For a one-time invoice line

Contribution to revenue over the period:

A one-time invoice amount is recognized as revenue if the invoice date falls within the analyzed period.

$$Revenu reconnu = Montant de la facture$$

b) For a recurring invoice line

Contribution to revenue over the period:

$$Revenu reconnu = Montant de l’abonnement * (Jours de service dans le mois / Nombre total de jours dans le mois)$$

Contribution to AR and DAP

Note : Any one-time invoice does not generate DAP and AR; only subscription invoices contribute to them.

CONDITIONS	DAP	AR
Invoice date < End of service period	Invoice line amount excl. tax – cumulative recognized revenue*	0
Invoice date > End of service period	0	Cumulative recognized revenue*

*Cumulative recognized revenue = cumulative value of contributions over all periods prior to and including the period considered.