ASC 606 for SaaS
Greywood CPA helps SaaS and subscription companies recognize revenue under ASC 606: building revenue schedules, writing the accounting policy and getting deferred revenue right before an audit or a deal. Revenue is the first thing investors, auditors and acquirers test.
Subscription fees are generally recognized over the subscription period. The harder questions are setup and implementation fees, usage-based charges, discounts on multi-year deals, and the sales commissions that ASC 340-40 generally requires you to capitalize.
Last reviewed: November 2026
| Step | In a SaaS contract |
|---|---|
| 1. Identify the contract | The order form and terms of service together |
| 2. Identify performance obligations | Subscription access, implementation, training, support |
| 3. Determine the price | Fixed fees, usage, discounts, credits |
| 4. Allocate the price | Based on standalone selling prices of each obligation |
| 5. Recognize revenue | Subscription ratably over the term; other items when delivered |
Upfront setup or onboarding fees often aren't a separate performance obligation, because the customer can't benefit from them without the subscription. In that case they're recognized over the subscription term, or longer if they create a renewal right. Substantial implementation services that the customer could get elsewhere may be separate and recognized as delivered.
Incremental costs of obtaining a contract, mainly sales commissions, are generally capitalized and amortized over the period the customer is expected to benefit, which can include expected renewals. A practical expedient lets you expense them if the amortization period would be one year or less.
Investors track annual recurring revenue (ARR), bookings and billings. Audited statements report GAAP revenue. The two can differ significantly because of timing, setup fees and usage. We help you reconcile them so the board deck and the financial statements tell the same story.
We review your order forms, pricing and billing data.
Scope and one fixed fee.
A written revenue policy and a revenue waterfall tied to billing.
Deferred revenue and commission schedules kept current.
Generally ratably over the subscription period, because the customer receives access continuously. Prepayments sit in deferred revenue until earned.
If they are not a separate performance obligation, they are recognized over the subscription term or the period of any renewal right they create. Substantial implementation services the customer could buy elsewhere may be separate.
Generally yes under ASC 340-40, amortized over the expected customer benefit period. If that period is one year or less, a practical expedient allows expensing.
ARR is an operating metric based on contracted recurring fees; GAAP revenue reflects when revenue is earned, including setup fees, usage and timing differences.
We quote one fixed fee in writing before any work starts, based on contract volume, pricing complexity and whether you need ongoing schedules.
Send us a sample of your contracts. A senior CPA will send a fixed-fee proposal within 1–3 business days.