Where SaaS revenue recognition goes wrong
IFRS 15 is well-understood in principle. In practice, growth-stage SaaS companies stumble on the same four patterns. Each one is a specific judgement that should be documented contemporaneously in a revenue memo, not reconstructed at audit.
01 — Setup and onboarding fees
If the setup fee does not transfer a good or service to the customer that is distinct from the underlying subscription, it is not a separate performance obligation. It defers, and amortises over the subscription term. Most growth-stage companies recognise it on invoice.
02 — Hybrid contracts
SaaS contracts that include a perpetual licence component, an implementation services component, and a subscription component need explicit allocation across the components based on relative standalone selling prices. Bundling them into one revenue line collapses the disclosure your auditor and your investors expect.
03 — Ramp-up pricing
If a contract has a stepped pricing schedule — say, $5k per month in year 1, $10k in year 2 — the question is whether the customer is receiving substantively the same service throughout. If yes, revenue is recognised on a straight-line basis (the weighted average) regardless of billing schedule. Recognising at billing rate overstates year 2.
04 — Reseller and channel arrangements
Gross vs net is the single biggest judgement. The principal-vs-agent assessment under IFRS 15 turns on who controls the service before transfer. The conclusion materially changes the top line. Get the memo right before the auditor asks.
What good documentation looks like
One revenue memo per material contract type. Each memo addresses the five-step model explicitly, applies it to the specific facts, and cites the IFRS 15 paragraphs that support each judgement. With that pack in place, an audit conversation takes hours instead of weeks.