Close & reporting
Revenue recognition (ASC 606 / IFRS 15)
Revenue recorded when it is genuinely earned rather than when cash lands, following the five-step model shared by IFRS 15 and reflected in FRS 102, so a UK company's recurring or multi-part contracts are recognised correctly each month.
Management report
Illustrative client · August 2026
GBP
| Line | Aug | Jul | |
|---|---|---|---|
| Revenue | 142,380 | 131,904 | +10,476 |
| Cost of sales | (51,260) | (48,115) | (3,145) |
| Gross profit | 91,120 | 83,789 | +7,331 |
| Payroll | (46,300) | (45,900) | (400) |
| SoftwareNoted | (6,480) | (5,490) | (990) |
| Rent | (8,000) | (8,000) | 0 |
| Other operating | (9,215) | (9,870) | +655 |
| Net income | 21,125 | 14,529 | +6,596 |
Reviewer's note
Software is up on last month after two seats were added mid-month. Revenue includes one milestone invoice that will not repeat next month.
Illustrative. An example of the document, not a client's figures.
The five-step model, applied to your contracts
Whether a UK company reports under FRS 102 or UK-adopted IFRS, the underlying question is the same: which performance obligation has actually been delivered this month, and how much of the contract price belongs to it. We work through each contract against that five-step model rather than recognising revenue on invoice date by default.
What's involved
- Contracts reviewed and separated into distinct performance obligations
- Transaction price allocated across each obligation
- A recognition schedule showing revenue by month against each contract's term
- Deferred and unbilled revenue tracked and reconciled to that schedule
- A memo documenting the judgement behind any non-obvious contract
- A quarterly check that new contract types have not been missed
Not only for software companies
Any UK business with multi-year contracts, bundled products and services, or upfront fees tied to ongoing delivery needs a recognition schedule, not only subscription or SaaS businesses. Construction, professional services and agencies with retainer arrangements run into the same question just as often.
Fits inside FRS 102 as well as IFRS
FRS 102's revenue model, including the changes from the Periodic Review 2024 that apply to periods starting on or after 1 January 2026, follows the same underlying logic as IFRS 15. We apply the version that matches the framework your statutory accounts use, and note where the two would give a different answer.
Delivery
Built and reviewed by a senior principal, inside the Xero, QuickBooks Online or Sage file your business already runs on, with the recognition schedule kept current every month rather than rebuilt at year end.
Questions
Frequently asked questions: Revenue recognition (ASC 606 / IFRS 15)
How do you handle a contract with several distinct deliverables?
Each performance obligation is identified separately and the transaction price is allocated across them, rather than recognised as one lump sum.
Is the recognition schedule rebuilt every month?
No. It is kept current as contracts change, with a quarterly check to confirm no new contract type has been missed.
Does the FRS 102 Periodic Review change how we recognise revenue?
It brings FRS 102's revenue model closer to IFRS 15 for periods starting on or after 1 January 2026, and we apply whichever version matches your statutory accounting basis.
How do you handle a contract modification partway through its term?
A modification is assessed against the standard's rules to decide whether it should be treated as a new contract or a change to the existing one, and the recognition schedule is adjusted accordingly, rather than simply restarting the calculation from the modification date without checking which treatment applies.
Does this affect how VAT is charged on a multi-element contract?
Revenue recognition timing under FRS 102 and VAT timing rules are separate, so a change in when revenue is recognised for reporting does not automatically change when VAT is due. We check both separately rather than assuming one always follows the other.
Does this apply outside of software subscriptions?
Yes. Any business with multi-year contracts, bundled products and services, or upfront fees tied to ongoing delivery needs a recognition schedule, not only SaaS companies.
What is the difference between deferred revenue and unbilled revenue?
Deferred revenue is cash collected before it is earned. Unbilled revenue is the reverse: work delivered before an invoice goes out.
How do we get started with revenue recognition (ASC 606 / IFRS 15)?
Getting started with revenue recognition (ASC 606 / IFRS 15) begins with a short review of your current records and software access. Once that is done we confirm scope and timing in writing, and ongoing work begins on the schedule agreed with you.
What if our records for revenue recognition (ASC 606 / IFRS 15) are not up to date?
If your records are behind, we scope a catch-up first so revenue recognition (ASC 606 / IFRS 15) starts from a clean, reconciled base. That catch-up is priced and timed separately from the ongoing engagement, so you always know what each part costs.
Related services
Industries
- SaaSBookkeeping and reporting for subscription software businesses tracking recurring revenue, deferred revenue and burn.
- Startups and VC-backed companiesBookkeeping and reporting for early-stage, venture-backed companies watching burn, runway and investor reporting closely.
- Agencies and consultanciesBookkeeping for marketing agencies, design studios and consulting firms billing clients on retainers and project fees.
Next step
Talk to the team that would run your books
A short call covers your setup, your software and what a first month would look like. You get a written scope and price after it.