> ## Documentation Index
> Fetch the complete documentation index at: https://docs.fincelo.app/llms.txt
> Use this file to discover all available pages before exploring further.

# Revenue Recognition — ASC 606 & IFRS 15

> How Fincelo handles revenue recognition under US GAAP and IFRS standards.

### 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)

***