Revenue Recognition
ASC 606 and IFRS 15, automated from contract data
Revenue recognition in LedgerUp is derived from contract terms and verified usage rather than maintained in a spreadsheet alongside them. Performance obligations come out of the signed agreement, the transaction price is built from fixed and variable components, schedules recalculate as usage lands and estimates change, and journal entries sync to your ERP with the evidence attached.
How recognition is derived
Revenue recognition under ASC 606 and IFRS 15 follows five steps: identify the contract, identify the performance obligations, determine the transaction price, allocate that price across obligations, and recognize revenue as each obligation is satisfied. LedgerUp runs those steps from source data — the executed contract, the metered usage, the issued invoice — so the recognition schedule is a computed result with a traceable input trail, not a separately maintained model that has to be reconciled back to billing.
The recognition workflow
The five-step model, applied continuously rather than at close.
Identify the contract and its amendments
The executed agreement and every amendment, linked to the customer record — including contract modifications that have to be assessed as prospective or cumulative catch-up.
Identify performance obligations
Distinct goods and services separated out of the contract: subscription access, usage-based delivery, implementation, professional services, support, and material rights such as renewal options or discounted extensions.
Determine the transaction price
Fixed consideration plus variable components — usage above allowances, overages, tiered pricing, credits, refunds, and incentives — with variable amounts estimated using expected value or most-likely-amount and the constraint applied and documented.
Allocate the price to obligations
Allocation on relative standalone selling price, with the SSP basis recorded so the same method is applied consistently across similar contracts — one of the areas auditors test for consistency first.
Recognize as obligations are satisfied
Ratably over time for subscription access, as consumed for usage-based delivery, at a point in time for milestone deliverables — producing the period-by-period schedule and the deferred revenue waterfall.
Re-estimate and post
As usage lands and estimates change, schedules recalculate and cumulative catch-up adjustments are computed, logged with a reason, and posted to NetSuite, QuickBooks, Sage Intacct, or Xero.
What the schedule carries
Every recognized figure keeps its inputs attached, which is what makes the schedule defensible in an audit sample.
Performance obligations
Each distinct obligation identified in the contract, its allocated amount, and the SSP basis used to allocate it.
Recognition method and timing
Whether the obligation is satisfied over time or at a point in time, and the measure of progress used.
Deferred revenue balance
Opening balance, additions from billing, releases to recognized revenue, and closing balance per period — the waterfall your ERP balance ties to.
Variable consideration estimate
The estimation method, the inputs behind it, the constraint assessment, and why the constraint was or wasn't applied.
Re-estimate history
How each estimate changed period over period, the reason, and the cumulative catch-up adjustment it produced. Auditors test whether re-estimates were timely and consistently applied.
Usage evidence
For usage-based obligations, the metered usage behind the recognized amount — so revenue traces to usage rather than to the invoice.
Contract modifications
Amendments, their effective dates, and whether each was treated prospectively or as a cumulative catch-up.
Journal entries
Every entry posted to the GL, linked to the obligation and period it relates to, with the approval trail for exceptions and manual adjustments.
docs.ledgerup.ai
Open the revenue recognition setup guide
Configuring recognition policies per contract type, SSP methods, close cadence, and ERP journal mapping is documented step by step on the docs site.
Go to docs.ledgerup.aiRelated reading
Revenue Recognition FAQ
What are the five steps of ASC 606 revenue recognition?
Identify the contract with the customer; identify the performance obligations in it; determine the transaction price; allocate that price to the performance obligations; and recognize revenue as each obligation is satisfied. IFRS 15 follows the same five-step model, with narrow differences in areas such as the constraint on variable consideration and licensing.
How is usage-based revenue recognized?
Usage revenue is generally recognized as the usage occurs, since the customer consumes the benefit as it's delivered. What complicates it is variable consideration: minimums, committed amounts, tiered pricing, and overage caps mean the period's revenue can't simply equal the period's invoice. Those amounts have to be estimated, constrained, and re-estimated as new usage information arrives.
What is variable consideration and how is it estimated?
Variable consideration is any part of the transaction price that isn't fixed — usage above an allowance, overages, volume discounts, credits, refunds, penalties, and incentives. It's estimated using either expected value (probability-weighted across outcomes) or most-likely-amount (the single most likely outcome), then constrained so revenue is only recognized to the extent a significant reversal isn't probable. The method, the inputs, and the constraint assessment all need to be documented.
Does LedgerUp post journal entries to my ERP?
Yes. Recognition entries and deferred revenue movements sync to NetSuite, QuickBooks, Sage Intacct, and Xero, each linked back to the performance obligation and period it relates to. LedgerUp is the subledger; your ERP stays the general ledger and the system of record for the financials.
Do I still need a revenue recognition spreadsheet?
The point of deriving schedules from source data is that you don't. A maintained spreadsheet is a second model that has to be reconciled back to billing every period, and it's where most restatements originate — the contract changed, or usage was rebilled, and the spreadsheet didn't follow. Schedules computed from the contract and the usage recalculate when those change.
How does this keep revenue recognition audit-ready?
Every recognized figure keeps its inputs attached: the contract and its amendments, the obligation and allocation basis, the variable consideration estimate and its constraint assessment, the underlying usage, the re-estimate history, and the journal entry. When an auditor samples a contract, the evidence trail already exists instead of being reconstructed under deadline.