This article answers the questions:

• Why doesn't my reported revenue match my revenue recognition report on the Customers page?
• My deferred revenue journal balances, yet my revenue recognition doesn't match my Xero or QuickBooks for that account - why?
• Why are my journals moving revenue into a different month than the start date?

Revenue Recognition versus IFRS / GAAP view

Revenue Recognition View

Revenue Recognition:  shows revenue allocated to the period in which service is provided, taking into account partial months but ignoring invoice date.  This is one of the two views which can be used for month end journals. How does ScaleXP allocate the spread of revenue?   This is used as the basis for MRR and ARR views as well, see Customers tab revenue recognition: MRR, ARR, and IFRS/GAAP revenue reporting by customer  

IFRS /  GAAP View

IFRS/ GAAP: as above, shows revenue allocated to the period in which the service is provided, taking into account partial months.  However, any revenue earned prior to the invoice issue month is allocated to the month the invoice is issued.  This view can also be used for month end journals. How to set journals to IFRS or GAAP revenue recognition rules so that backdated revenue is recognised at time of invoice.

Choosing a report for revenue recognition journals

For purposes of deferred revenue journals, ScaleXP provides the option to choose between the IFRS/GAAP and Revenue recognition views.

Here is a quick comparison of the pros and cons of each option:

IFRS/GAAP view - This is our recommended view as it prevents late invoices from impacting prior months of revenue.   If you are not restating prior months to account for back-dated invoices, this view makes it easy to align ScaleXP reporting with your accounting system and thus to validate and document your accounting revenue. However, it means that your accounting view will not exactly match the Revenue Recognition, MRR, and ARR views, all of which will continue to recognise revenue in the month of service, irrespective of invoice date.

Revenue Recognition view - If you wish to perfectly align your accounting revenue with the timing of services and are happy to create journals in prior months for back-dated revenue, then this view is for you. Best practice is to create accrued revenue in the months prior to the invoice being issued. Should you not accrue revenue, the system will effectively generate negative deferred revenue in prior months instead. This is because, if the system does not see the revenue as accrued, it will defer revenue that has not yet been invoiced.

How to tell which view is being used in your journals

Accrued revenue is treated in the same way in both reports – it is included in the month of accrual.

In the deferred revenue journal, there is a difference in the way back-dated revenue is treated, as described above.

To check which view is being used in your deferred revenue journal, see Section 4: Recognise Revenue - the report type is specified in 4a.

In this example, the deferred revenue journal is using the IFRS / GAAP methodology of revenue recognition, so back-dated revenue is recognised in the month of invoice.