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REVREC — Q&A

Q: How does Fincelo handle the 5 steps of ASC 606? Step 1 — Identify the contract: Fincelo uses the signed contract record. Status must be ‘active’ or ‘approved’ before recognition can begin. Step 2 — Identify performance obligations: For a pure SaaS subscription, there is typically one PO (access to the platform). For bundles (SaaS + implementation
  • training), Fincelo splits into separate POs and allocates SSP to each.
Step 3 — Determine transaction price: ARR from the contract. Excludes variable components (usage overages) until they can be estimated reliably. Step 4 — Allocate price: For single PO, 100% to the SaaS PO. For bundles, allocation is proportional to SSP of each component. Step 5 — Recognise: Straight-line over the service period. Monthly = ARR ÷ 12. Daily proration for partial months at start and end.
Q: What are the 5 backdated contract scenarios? Scenario 1 — Multi-milestone PO, current period: straightforward recognition from service start, no prior period issue. Scenario 2 — Backdated contract, prior period open: recognition posted to prior period (still open). No special approval needed. Scenario 3 — Late PO renewal, locked period: Fincelo presents 3-path resolution (A/B/C) based on materiality of the locked-period amount. Scenario 4 — Manual recognition date override: CFO sets the recognition start date manually. Full audit trail with name + timestamp. Scenario 5 — Period close conflict with GSTR-1: locked period amount coincides with a period where GSTR-1 has already been filed. Path C required — two-approver sign-off (CFO + Controller).
Q: What are Path A, Path B, and Path C? Path A — Low materiality (below 3% of avg monthly revenue): Recognise full catch-up amount in the current open period. Single approver (Finance Manager). Fastest resolution. Path B — Medium materiality (3%–10% of avg monthly revenue): Recognise catch-up in current period with enhanced disclosure. Single approver (CFO or Controller). Path C — High materiality (above 10% of avg monthly revenue): Post a correcting entry to the locked period (requires unlock). Two approvers — CFO primary + Controller secondary. GSTR-1 conflict flag raised if locked period has filed return.
Q: How does Fincelo handle PO-delayed invoices for revenue recognition? Invoice date and recognition date are independent: When a contract starts April 1 but the PO arrives May 15:
  • April 1: Proforma raised (no tax invoice number, no GST)
  • May 15: PO received → Proforma converts to Tax Invoice (May sequence, May date)
  • Recognition: CFO approves April 1 as recognition start date
  • April revenue is posted retroactively with full audit trail
  • Invoice date (May 15) ≠ recognition date (April 1)