Important Changes in Revenue and Profitability Definitions for SaaS Companies
OCTOBER 28, 2017
Starting in January, public software companies will report their financials using ASC 606. Normally, accounting changes are not that interesting, but ASC 606 will change several of the key attributes and benchmarks SaaS startups use. The two most important changes are changes to revenue and profitability. Today, all software revenue is recognized ratably over the contract period. If a business finds a 12 month contract for $12,000, the company record $1000 of revenue for each month.