Editor’s Note: With the movement of many data and legal discovery technologies to the cloud, this accounting update regarding SaaS offerings may be of use to providers who have or are considering delivering SaaS-based services.
Extract from article by Tomasz Tunguz
Bookings, MRR, Revenue. All these metrics form part of the financial statements of SaaS companies. For as long as SaaS companies have existed, we’ve used one way of counting revenue, called GAAP. Starting in 2017, revenue recognition for SaaS companies will change, and SaaS startups will have more flexibility in the way they record revenue than in the past.
BDO has published the clearest summary of these changes, which number more than 750 pages in the tax code. Your accountant or CFO is the best person to consult about these changes. Public companies must transition to these new regulations starting in 2017. Private companies have the option to migrate to these new standards in 2017. They are obligated to comply in 2018.