Revenue Recognition
Automate your accrual accounting process with Stripe Revenue Recognition.
Revenue recognition is a fundamental part of accrual accounting. Generally accepted accounting principles (GAAP) state that you recognize revenue when you realize and earn it, which might be earlier or later than when you actually receive payments. You must correctly recognize and defer revenue to have the most accurate insights into your business profitability and financial health.
Stripe Revenue Recognition helps you simplify the process of recognizing revenue. This feature includes:
- Recognized and deferred revenue summaries
- Downloadable accounting reports and waterfall charts
- Interactive revenue numbers for full audit transparency
- Configurable accounting period controls and revenue recognition rules
Learn more about the Stripe Revenue Recognition methodology.
Who needs Revenue Recognition
Revenue recognition is critical for many types of businesses, especially:
- Public companies or large businesses with over 25 million USD in annual revenue because they’re legally required to comply with ASC 606 and GAAP and IFRS accounting standards.
- Startups that need to follow accrual accounting to raise money from investors or get a loan from a financial institution.
- Subscription and service-based businesses.
- Businesses where customers pay up front before receiving a good or service.
As businesses grow, revenue recognition becomes more complex due to larger product lines and increased payment volumes. Revenue recognition can be especially complex for subscription businesses that need to manage subscription changes, handle refunds and disputes, and manage prorations. These subscription updates can complicate the process of recognizing and deferring revenue accurately and compliantly.
New accounting standards
On May 28, 2014, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) jointly issued Accounting Standards Codification (ASC) 606, a new framework for businesses to recognize revenue from contracts with customers.