What is SaaS Revenue Recognition?

SaaS revenue recognition is the accounting method used to report SaaS subscription revenue in a company's financial statements. The subscription model charges customers monthly or annually for software use.

The subscription model, based on ASC 606, Revenue from Contracts with Customers, is the most frequent way SaaS companies recognize revenue (FASB). The time-proportional method recognizes revenue throughout the contract. This method acknowledges revenue straight-line during the contract time, presuming the customer will use the service at a steady pace.