For a SaaS or subscription business, revenue recognition can be complex, mainly because of the service-oriented nature of the product. While your customers may pay you a lump sum upfront for a year’s worth of usage, you won’t be able to categorize that entire amount of cash as revenue right away. Interpretive Response: The staff believes that, provided all other revenue recognition criteria are met, service revenue should be recognized on a straight-line basis, unless evidence suggests that the revenue is earned or obligations are fulfilled in a different pattern, over the contractual term of the arrangement or the expected period during which those specified services will be performed, 30 whichever is longer. In this case, the customer contracted for the on-going activity tracking obligations and have implications for revenue recognition. In the software industry, a contract may take the form of formal signed contracts, purchase orders, electronic communications, or, in the case of consumer products, sales receipts. Master agreements often define all of the basic terms and conditions for transactions between the parties.