Deferred Revenue
Deferred revenue (also called unearned revenue) is a liability representing payments received for goods or services not yet delivered. Under ASC 606, revenue is recognized as performance obligations are satisfied, not when cash is received.
Key Details
- SaaS companies record annual subscriptions as deferred revenue, recognizing monthly as service is provided
- Deferred revenue appears as a current liability (due within 12 months) or long-term liability on the balance sheet
- Revenue recognition schedules track the systematic conversion of deferred revenue to earned revenue
- Proper deferred revenue management is critical for accurate financial reporting and ASC 606 compliance