Under the latest GAAP Revenue Recognition guidelines codified in ASC606 Revenue from Contract with Customers, Deferred Revenue analysis now requires a 5-step process that takes into account the total contract value, implied and explicit discounts or sales promotions, any variable or fixed considerations (e.g., varied price based on API calls, or fixed price no matter the usage), and cancellation rights. Companies need to carefully review the FASB guidance to ensure their revenue recognition is properly in line with the new revenue standard. Finvisor has ASC606 experts that can ensure you are recognizing revenue accurately and in accordance with all GAAP requirements.
Even though unearned revenue is considered a liability because you haven’t technically earned it until you provide the good or service, it can still benefit you. Here are a few of the most noteworthy advantages of unearned revenue:
When it comes to owning a successful small business, cash will always be king. Cash is what your business uses to offset its expenses and helps you out during slow seasons. By collecting these advanced payments, your business will find it easier to keep a positive cash flow and stay afloat during hard times.
Even though unearned revenue is considered a liability because you haven’t technically earned it until you provide the good or service, it can still benefit you. Here are a few of the most noteworthy advantages of unearned revenue:
Whether you’re a small, budding startup or a large, Fortune 100 conglomerate, you’re likely to come in contact with unearned revenue at some point. Having the right tools in place and people to forecast these liabilities can help you stay profitable and balance your books in a way that helps keep your cash flows in the green for the foreseeable future.
*This blog does not constitute solicitation or provision of legal advice and does not establish an attorney-client relationship. This blog should not be used as a substitute for obtaining legal advice from an attorney licensed or authorized to practice in your jurisdiction.*
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