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 DRC (deferred revenue) and ARB (accrued invoices) 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 time-based invoice line

Contribution to revenue for the period:

A one-time invoice amount is recognized in 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 for the period:

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

Contribution to ARB and DRC

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

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

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