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Content Overview [ Contact us ](#contact-us-sidebar) #### Content Overview #### Your deferred revenue schedule is your first audit test [Book a Consult](https://calendly.com/consulttreelife/20min?utm_source=blogbannertreelife) #### Get in touch with us Your information is confidential and secure Or [Book a CONSULTATION](https://calendly.com/consulttreelife) Δ Blog Content Overview - [0.1 What is the correct way to recognise revenue from a SaaS subscription under Ind AS 115?](#What_is_the_correct_way_to_recognise_revenue_from_a_SaaS_subscription_under_Ind_AS_115) - [1 Who must follow Ind AS 115 for their revenue?](#Who_must_follow_Ind_AS_115_for_their_revenue) - [2 The five-step model: how it applies to a SaaS contract](#The_five-step_model_how_it_applies_to_a_SaaS_contract) - [3 How does deferred revenue work, and where does GST create a mismatch?](#How_does_deferred_revenue_work_and_where_does_GST_create_a_mismatch) - [4 How do you handle non-refundable onboarding fees?](#How_do_you_handle_non-refundable_onboarding_fees) - [5 What happens when a customer upgrades or downgrades mid-contract?](#What_happens_when_a_customer_upgrades_or_downgrades_mid-contract) - [6 How is variable consideration handled: usage fees, SLA penalties, discounts?](#How_is_variable_consideration_handled_usage_fees_SLA_penalties_discounts) - [7 Does a multi-year SaaS deal have a significant financing component?](#Does_a_multi-year_SaaS_deal_have_a_significant_financing_component) - [8 Common mistakes that distort P&L and balance sheet](#Common_mistakes_that_distort_PL_and_balance_sheet) - [9 NFRA and audit readiness for unlisted SaaS companies in 2026](#NFRA_and_audit_readiness_for_unlisted_SaaS_companies_in_2026) - [10 Treelife practitioner note](#Treelife_practitioner_note) - [11 Ind AS 115 disclosure requirements under Schedule III](#Ind_AS_115_disclosure_requirements_under_Schedule_III) - [12 FAQs](#FAQs) Revenue recognition is where SaaS accounting gets genuinely hard. A customer pays ₹12 lakh upfront for an annual subscription in April, and your instinct is to book it as revenue. That instinct is wrong under Ind AS 115, and the gap between what cash says and what the standard requires is exactly what statutory auditors and the National Financial Reporting Authority (NFRA) are spending more time examining. Ind AS 115, Revenue from Contracts with Customers, became mandatory for most Indian companies from FY 2018-19 onwards and replaced the older Ind AS 18 framework with a single, control-based five-step model. For SaaS and subscription businesses, where contracts bundle access, implementation, support, and sometimes bespoke development into one commercial agreement, the standard demands a level of disaggregation that most founding teams do not anticipate until their first serious audit or [investor due diligence exercise](https://treelife.in/services/virtual-cfo/due-diligence-services/). ### **What is the correct way to recognise revenue from a SaaS subscription under Ind AS 115?** Under Ind AS 115, revenue from a SaaS subscription is recognised over the subscription period as the performance obligation (continuous access to the platform) is satisfied over time. A ₹12 lakh annual subscription received upfront is recorded entirely as a contract liability (deferred revenue) on the date of receipt and released to the income statement at ₹1 lakh per month as the service is delivered. Recognising the full amount as revenue in the month of receipt is a material misstatement under Section 128 of the Companies Act, 2013, and will be flagged by a statutory auditor. ## Who must follow Ind AS 115 for their revenue? Ind AS 115 applies to all companies covered by the MCA’s Ind AS roadmap. That means all listed companies regardless of size and all unlisted companies with a net worth of ₹250 crore or more, along with every holding company, subsidiary, joint venture, and associate of any such company, even if the subsidiary itself is below the threshold. The MCA’s Second Amendment Rules, 2025 (notification dated 13 August 2025) have also formally replaced all remaining references to the old Ind AS 18 (Revenue) with Ind AS 115 across the framework, removing any ambiguity about which standard governs revenue recognition for Ind AS-compliant entities. For a pre-Series B SaaS company that is unlisted and well below the ₹250 crore net worth threshold, Ind AS 115 is not currently mandatory. But this changes the moment a company falls into scope through any of three routes: its own net worth crosses the threshold, it becomes a subsidiary of an investor entity that is already in scope, or it chooses voluntary adoption ahead of an IPO or foreign investor demand. At Treelife, we routinely see PE and VC term sheets requiring Ind AS-compliant financials as a condition of closing, which effectively brings the standard into scope for companies that are technically not mandated by the Companies Act roadmap. Once a company adopts Ind AS, whether mandatorily or voluntarily, the decision is irreversible under the Companies Act, 2013. ## The five-step model: how it applies to a SaaS contract Ind AS 115 applies a single five-step model to every revenue contract. For SaaS businesses, the model plays out as follows. **Step 1: Identify the contract with the customer** A contract exists when both parties have approved it, payment terms are identified, the contract has commercial substance, and collection of consideration is probable (Ind AS 115, paragraph 9). A signed Master Service Agreement, an online order confirmation, or a subscription accepted via your payment page all qualify. The critical test is whether you have an enforceable right to payment for performance completed to date. Month-to-month subscriptions where either party can cancel at any time without compensation require careful assessment. If the customer can terminate without penalty, your contract may be only the current month’s commitment, not the full annual term. **Step 2: Identify the performance obligations** A performance obligation is a promise to transfer a distinct good or service (Ind AS 115, paragraphs 22-30). A service is distinct if the customer can benefit from it on its own or with other readily available resources, and if your promise to deliver it is separately identifiable from other promises in the contract. In a typical Indian SaaS deal, you may have three or more performance obligations embedded in a single commercial agreement: - Subscription access (continuous, time-based) - Onboarding or implementation services (one-time, point-in-time or over-time) - Annual maintenance and customer support (ongoing, time-based) - Custom development or integration (project-based, over-time) - Training sessions (discrete, point-in-time) Each of these must be assessed individually. A standard onboarding process that the customer could obtain from a third party is generally distinct. A highly customised configuration that is interdependent with the subscription module may not be, in which case it is combined with the subscription into a single performance obligation. **Step 3: Determine the transaction price** The transaction price is the amount of consideration you expect to be entitled to in exchange for transferring the promised services (Ind AS 115, paragraph 47). For most SaaS contracts, this starts with the contracted fee but must be adjusted for: - Variable consideration (usage-based fees, SLA penalties, volume discounts) - Significant financing components (multi-year deals with payment terms that include deferred payment) - Consideration payable to the customer (implementation credits, free months) - GST collected on behalf of the government (excluded entirely from the transaction price) The constraint on variable consideration is critical. You include variable amounts only to the extent that it is highly probable a significant reversal of cumulative revenue will not occur (Ind AS 115, paragraph 57). For usage-based pricing where consumption is uncertain, this means you often cannot recognise usage revenue until the usage is known. **Step 4: Allocate the transaction price to performance obligations** Once you have a transaction price and a list of performance obligations, you allocate the price to each obligation based on its relative standalone selling price (SSP), the price at which you would sell that service separately to a customer in similar circumstances (Ind AS 115, paragraphs 76-86). Determining SSP is where most SaaS companies struggle, particularly when they discount heavily or bundle aggressively to win enterprise deals. The three permitted estimation methods are: adjusted market assessment (what would the market pay for this service), expected cost plus margin (cost to deliver plus a reasonable margin), and residual approach (the transaction price minus the sum of observable SSPs of other obligations, only allowed when SSP is highly variable or uncertain). If you offer a bundle discount, it must be allocated across all performance obligations in proportion to their relative SSPs unless specific conditions allow allocation to a subset. Performance obligationStandalone selling priceAllocation %Allocated price (₹12 lakh contract)Subscription access (12 months)₹10 lakh67%₹8 lakhImplementation services₹2.5 lakh17%₹2 lakhAnnual support₹2.5 lakh17%₹2 lakh**Total****₹15 lakh****100%****₹12 lakh**In this example, a ₹3 lakh bundle discount is allocated proportionally across all three obligations. **Step 5: Recognise revenue when or as each performance obligation is satisfied** Revenue is recognised when control of the promised service transfers to the customer, either over time or at a point in time (Ind AS 115, paragraphs 31-38). For SaaS subscription access, the customer simultaneously receives and consumes the benefit as you perform, which clearly satisfies the over-time criterion. Revenue is recognised on a straight-line basis over the subscription period unless there is a better measure of progress. For implementation services, the answer depends on nature. A standard onboarding completed in a week is likely recognised at a point in time on completion. A complex multi-month implementation where the customer is actively directing the work and receives tangible deliverables as you go may qualify as over-time recognition using an input or output method. For training sessions, recognition occurs at the point in time each session is delivered. ## How does deferred revenue work, and where does GST create a mismatch? This is the area that creates the most confusion in practice, and it sits at the intersection of Ind AS 115 and GST that most published guidance rarely addresses together. When a customer pays ₹12 lakh upfront for a 12-month subscription starting 01/04/2026, your books should reflect the following on the date of receipt: - Debit: Bank: ₹14.16 lakh (including 18% GST of ₹2.16 lakh) - Credit: GST payable: ₹2.16 lakh - Credit: Contract liability (deferred revenue): ₹12 lakh Each month, as you deliver the service: - Debit: Contract liability: ₹1 lakh - Credit: Revenue: ₹1 lakh The deferred revenue account should carry only the net-of-GST amount. GST liability arises on the invoice date, not the revenue recognition date. SaaS services attract 18% GST under SAC code 998314 (licensing services for the right to use computer software, classified as OIDAR under the GST framework). This means you owe GST to the government in the month you invoice, regardless of when you recognise revenue. The timing difference is permanent for each contract. It does not reverse through a deferred tax adjustment. The practical consequence: a SaaS company with ₹8 crore in ARR and annual billing cycles will carry between ₹3 crore and ₹5 crore in deferred revenue on its balance sheet at any point in the year. If the deferred revenue schedule is not reconciled monthly against cash collections, the general ledger, and the [GSTR-1 return](https://treelife.in/compliance/gst-compliance-for-startups/), discrepancies compound. Your statutory auditor will test the deferred revenue balance and compare it against your revenue recognition schedule. If they do not tie, expect material audit queries. For SaaS companies preparing for their first Ind AS audit, Treelife’s VCFO practice builds the full deferred revenue waterfall and GST-to-revenue reconciliation before the audit fieldwork begins, significantly reducing year-end adjustment risk. [Learn more about our VCFO services.](https://treelife.in/vcfo-services/) ## How do you handle non-refundable onboarding fees? Non-refundable upfront fees are a common SaaS commercial structure. You charge a one-time onboarding fee at contract initiation, before the subscription period begins. Ind AS 115 (paragraph 38 and Appendix guidance) requires a careful assessment of whether this fee relates to a distinct performance obligation or is simply an advance payment for future subscription services. If the onboarding process does not represent the transfer of a distinct service to the customer, because the customer cannot benefit from the onboarding without the subsequent subscription, then the fee is not a separate performance obligation. It is part of the transaction price for the subscription and must be deferred and recognised over the subscription period, not at the point of onboarding completion. This has significant implications for SaaS companies that book onboarding fees as immediate revenue. If auditors or NFRA determine the onboarding is not distinct, the recognised revenue must be restated, the deferred revenue balance increases, and the tax position for the relevant period changes. ## What happens when a customer upgrades or downgrades mid-contract? Contract modifications are one of the most practically complex areas of Ind AS 115 (paragraphs 18-21) and are almost never addressed by generic explainers. In SaaS, you encounter modifications constantly: a customer on a ₹5 lakh annual plan upgrades to a ₹9 lakh plan at month 6, or a customer downgrades from an enterprise tier to a starter tier mid-contract, or a customer adds a new module. The accounting treatment depends on whether the modification creates a new, separate contract or modifies the existing one. A modification is treated as a separate new contract if two conditions are met: the scope increases because of the addition of a distinct good or service, and the price increases by an amount that reflects the SSP of the additional service adjusted for the specific circumstances of the contract. In SaaS terms, if a customer adds a genuinely new module at a price consistent with what you would charge a new customer for that module, it is a new contract. The existing contract continues to be accounted for on the original terms. If the modification does not meet both conditions, for example the customer upgrades to a higher tier of the same subscription at a discounted rate, the modification is not a separate contract. You then choose between two approaches: if the remaining services to be delivered are distinct from what has already been delivered (which is usually the case in SaaS because the upgraded access is genuinely different), you treat the modification as the termination of the old contract and the creation of a new one. The consideration is re-allocated and revenue for the remaining period is recognised based on the blended rate going forward. The ICAI’s 2026 study circle has confirmed that hybrid SaaS-plus-services contracts should unbundle at SSP and true-up variable consideration quarterly, which aligns with this treatment for most Indian SaaS modification scenarios. **Table: how to classify SaaS contract modifications** Modification scenarioNew separate contract?Accounting treatmentNew module added at full SSPYesSeparate contract; original unaffectedNew module added at discountNoProspective cumulative catch-up on combined contractUpgrade to higher tier, price adjustedNoTerminate old, create new at blended rateDowngrade to lower tier, credit givenNoTerminate old, create new; credit reduces remaining revenueAnnual contract extended by 12 months at same rateYes (if distinct)Separate contract at SSP## How is variable consideration handled: usage fees, SLA penalties, discounts? Variable consideration is particularly common in enterprise SaaS in India, where contracts include usage-based fees (API calls, active user counts, data processed), SLA credits for downtime, volume tiering, and periodic price adjustments linked to indices. Ind AS 115 (paragraphs 50-58) requires you to estimate variable consideration using either the expected value method (probability-weighted amounts across possible outcomes) or the most likely amount method (single most likely outcome). You then apply the constraint: you include an amount of variable consideration only to the extent it is highly probable that a significant reversal of cumulative revenue will not occur. For usage-based SaaS pricing, this typically means you cannot recognise usage revenue until the usage period has closed and the usage is measurable. For SLA credits, you must estimate the probable credit at each reporting date and deduct it from the transaction price. For volume discounts where a customer is likely to qualify for a lower tier, you should recognise revenue using the expected discount rate from the start of the contract, not at the higher rate until the discount threshold is crossed. ## Does a multi-year SaaS deal have a significant financing component? This is a question almost nobody asks early enough. Ind AS 115 (paragraphs 60-65) requires you to assess whether a contract contains a significant financing component when the timing of payment and the timing of service delivery are significantly different. If a customer pays three years of subscription fees upfront at a discount in exchange for early payment, or if a customer is on extended credit terms, the standard requires you to adjust revenue and recognise interest income or interest expense separately. The practical expedient in Ind AS 115 (paragraph 63) allows you to skip this assessment if the period between payment and performance is one year or less. For most Indian SaaS businesses on annual billing cycles, this expedient applies and you can ignore the financing component entirely. Where it becomes relevant: multi-year enterprise deals with upfront payment at a significant discount to annual pricing, or deals where payment is deferred well beyond service delivery. In those cases, the implied financing rate must be used to gross up revenue and recognise notional interest income over the contract term, an adjustment that requires an estimate of the company’s incremental borrowing rate. ## Common mistakes that distort P&L and balance sheet **Booking upfront payments as revenue on receipt.** This is the most widespread error. A ₹12 lakh annual subscription collected in April is a ₹12 lakh liability, not revenue. Recognising it as revenue inflates current-period profit, understates the balance sheet liability, and creates a restatement risk in every subsequent period. **Treating all onboarding revenue as separate and immediate.** If the onboarding service is not distinct, because the customer cannot independently use the output without the subscription, recognising onboarding fees immediately is incorrect. The fee must be allocated to the subscription and recognised over the subscription period. This is one of the most common audit adjustments in Indian SaaS audits. **Failing to document standalone selling prices.** Without a documented SSP policy, your auditor has no basis to validate how the transaction price was allocated across performance obligations. From 2025 onwards, NFRA’s inspection framework specifically targets SSP evidence and variable consideration estimates in SME revenue samples. A company without a documented SSP catalogue risks extended audit procedures and potential qualification. **Mixing GST liability with deferred revenue.** The deferred revenue balance should be net of GST. Including GST in the deferred revenue account overstates both the liability and the revenue released in subsequent months. The GST component sits separately as GST payable and is settled through your monthly GSTR-3B filing. **Ignoring contract modifications.** When a customer upgrades or downgrades, many SaaS companies simply adjust the next invoice without revisiting the revenue recognition schedule. If the modification changes the performance obligations or the transaction price, the revenue schedule must be recalculated from the date of modification. **Not capitalising sales commissions on contracts exceeding 12 months.** Under Ind AS 115 (paragraphs 91-94), incremental costs of obtaining a contract (typically sales commissions) must be capitalised and amortised over the expected contract period if the amortisation period exceeds one year. Expensing them immediately understates assets and front-loads costs, creating uneven margin recognition across the contract term. The practical expedient allows immediate expensing only when the amortisation period would be one year or less. ## NFRA and audit readiness for unlisted SaaS companies in 2026 Until late 2024, NFRA audit inspections focused primarily on listed entities. From 2025 onwards, NFRA expanded its sample queries to SMEs, with approximately 20% of inspection samples targeting SSP evidence and variable consideration estimates. The MCA’s Second Amendment Rules of August 2025 have further reinforced that NFRA oversight covers revenue recognition quality broadly, not just listed-company audits. For an unlisted SaaS company that is Ind AS-compliant, because it crossed the ₹250 crore net worth threshold or is a subsidiary of a listed entity, this means the following documentation is now non-negotiable: - A documented SSP policy, updated at least annually, covering each category of service you offer - A revenue recognition policy that covers over-time versus point-in-time determination for each performance obligation type - Contract-level workings for bundled deals showing the allocation of transaction price to each performance obligation - An assumption library for variable consideration estimates, with the rationale for the estimation method chosen - Immutable audit trails showing the version history of every revenue recognition schedule and policy memo, with timestamps - A deferred revenue reconciliation comparing the subledger to the general ledger at each reporting date The ICAI’s guidance also recommends quarterly true-ups for hybrid SaaS-plus-services contracts, where variable elements crystallise over time. Building this infrastructure before your statutory audit is completed, not during fieldwork, is the difference between a clean report and a report with material emphasis-of-matter paragraphs. ## Treelife practitioner note In the VCFO engagements we have run at Treelife for B2B SaaS companies, the pattern we see most consistently is not a failure to understand Ind AS 115 conceptually. Founders generally know that annual subscriptions need to be deferred. The failure is at the implementation layer: the deferred revenue schedule lives in a spreadsheet maintained by one finance executive, the SSP allocation was done once at the start and never revisited as pricing evolved, and the GST liability sits in the same row as the deferred revenue balance making the net figure meaningless. The issue compounds when you reach a Series B or [growth equity raise](https://treelife.in/startups/the-series-a-fundraising-playbook/). PE investors now routinely request Ind AS-compliant financials for the trailing three years, which means a SaaS company that has been recognising revenue on a cash basis has to restate three years of P&L. In one engagement, a Bengaluru-based B2B SaaS company at ₹25 crore in ARR, the restatement reduced recognised revenue for FY 2023-24 by ₹3.2 crore, entirely because implementation fees were being recognised at contract signing rather than allocated to the subscription period. The company’s reported EBITDA margin dropped by 4 percentage points on restated numbers, which affected the valuation multiple applied in the round. The fix is always the same: build the revenue recognition model as a dynamic schedule linked to your CRM and billing system, document SSPs annually with a policy memo signed by the CFO or authorised signatory, and reconcile deferred revenue to the general ledger at every month-end before books are closed. Ind AS 115 is an accounting requirement. At scale, it is also a commercial asset: clean revenue recognition tells an investor exactly what you have earned and when. ## Ind AS 115 disclosure requirements under Schedule III Ind AS 115 (paragraphs 110-129) requires extensive disclosures in your [annual financial statements](https://treelife.in/finance/financial-due-diligence-checklist-for-startups/). Schedule III of the Companies Act, 2013 requires these disclosures to be presented consistently. For a SaaS company, the mandatory disclosures include: - Disaggregation of revenue by product line, geography, and contract duration (monthly, annual, multi-year) - A reconciliation of the opening and closing balance of contract liabilities (deferred revenue) for each period - Transaction price allocated to remaining performance obligations and the expected timing of recognition - Qualitative description of performance obligations, significant payment terms, and the nature of variable consideration - Judgements made in applying the standard, including the method used to measure progress for over-time obligations - Information about contract assets and any impairment recognised The disaggregated revenue disclosure is more demanding than most SaaS companies expect. It requires you to show revenue broken down in a way that depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. For a SaaS company, this typically means at least a split between subscription revenue, professional services revenue, and any usage or consumption-based revenue. ## FAQs **Q: Does Ind AS 115 apply to my startup if it is not yet listed and has a net worth below ₹250 crore?** A: Not mandatorily under the MCA roadmap. Ind AS 115 is mandatory for listed companies (regardless of size) and unlisted companies with a net worth of ₹250 crore or more, plus all holding companies, subsidiaries, associates, and joint ventures of those entities. If your startup is below the threshold and not part of a qualifying group, you follow AS 9 for revenue recognition. Voluntary adoption of Ind AS is permitted but irreversible once adopted. **Q: How do I calculate standalone selling prices if I only sell bundled packages?** A: You use one of three estimation methods permitted by Ind AS 115: adjusted market assessment (what the market would pay), expected cost plus a reasonable margin, or the residual approach (allowed only when the SSP of one element is highly variable or uncertain and SSPs of others are observable). Document your methodology in a policy memo and update it at least annually. If you never sell unbundled, the residual approach applied to the most uncertain element is often the most defensible starting point. **Q: Can I recognise implementation fee revenue immediately if I complete onboarding in under a week?** A: Only if the implementation is a distinct performance obligation, meaning the customer can benefit from the onboarding independently, without the subscription. If the onboarding’s value is entirely dependent on the customer going on to use the platform, it is not distinct and must be combined with the subscription. Revenue is then deferred and recognised over the subscription term. The speed of delivery is not the test; distinctness is. **Q: How does the GST timing work: do I recognise revenue and GST together?** A: No. GST liability arises on the invoice date under the CGST Act, regardless of when you recognise revenue under Ind AS 115. For a ₹12 lakh annual subscription invoiced upfront, the full ₹2.16 lakh GST is payable in the month of invoicing. The deferred revenue balance should carry only the ₹12 lakh net-of-GST amount. Revenue is then released monthly at ₹1 lakh, with no GST component in the revenue release entry. **Q: What if a customer cancels mid-subscription? How do I reverse deferred revenue?** A: If the contract is terminated and any refund obligation exists, you reduce the deferred revenue balance by the amount of the refund and debit it against the customer liability. If the subscription is non-refundable and the contract is terminated by the customer, you assess whether you have satisfied the remaining performance obligation. If not, the non-refundable amount can be recognised as revenue when the remaining obligation is fully extinguished and no further obligation exists, or over the original contract period depending on the facts. **Q: How do usage-based pricing components work in a subscription model?** A: Usage-based fees are a form of variable consideration. You estimate them using the expected value or most likely amount method, subject to the constraint that you include only amounts for which it is highly probable a significant revenue reversal will not occur. In practice, this means recognising usage revenue only when usage is measurable and the relevant billing period has closed. Front-loading usage revenue based on historical patterns is aggressive and likely to attract audit scrutiny. **Q: What is the practical expedient for contract costs: sales commissions?** A: Ind AS 115 (paragraph 94) provides a practical expedient allowing you to expense incremental contract costs immediately if the amortisation period would be one year or less. For SaaS contracts with monthly or annual terms, this usually means commissions on one-year subscriptions can be expensed as incurred. For commissions on multi-year contracts, you must capitalise and amortise them over the expected customer relationship period, not just the initial contract term. **Q: How do I account for free trial periods or free months offered as sales incentives?** A: Free trial periods where the customer is not contractually committed generally do not constitute a contract under Ind AS 115 because collection is not probable. No revenue is recognised during a free trial. If you offer a free month as part of a 13-month subscription at the standard 12-month price, the one free month is treated as a discount. It reduces the transaction price, and that reduced amount is recognised over all 13 months of the contract. **Q: For a multi-year deal with payment deferred until year two, do I need to account for a financing component?** A: Yes, if the timing difference between payment and performance is significant and creates a financing benefit for the customer or the company. You must estimate the implicit financing rate and adjust revenue accordingly, recognising notional interest income or expense over the contract term. The practical expedient for contracts of one year or less does not help here if the payment deferral extends beyond one year. **Q: What disclosures does a SaaS company need to make in its financial statements under Ind AS 115?** A: The required disclosures include disaggregated revenue by product type and geography, a reconciliation of the opening and closing deferred revenue balance, the transaction price allocated to remaining performance obligations, significant judgements used in determining performance obligations and SSPs, information about variable consideration estimates and constraints applied, and contract cost assets recognised and amortised. These are mandated under paragraphs 110-129 of Ind AS 115 and must be presented consistently with Schedule III of the Companies Act, 2013. **Q: Does Ind AS 115 affect how I report ARR and MRR to my investors?** A: Ind AS 115 governs statutory financial statements, not operating metrics. ARR and MRR are business metrics that are not defined by Ind AS 115. However, if your investors use ARR to compute an implied revenue run-rate and then reconcile it against your statutory P&L revenue, a significant mismatch (often caused by deferred revenue movements) requires explanation. Clean Ind AS 115 accounting actually makes your ARR-to-revenue bridge cleaner and more credible in investor conversations. **Q: Can our company use the portfolio approach to simplify accounting for subscriptions?** A: Yes. Ind AS 115 (paragraph 4) permits a practical expedient allowing you to account for a portfolio of contracts with similar characteristics if the effect on the financial statements would not differ materially from accounting for each contract individually. For homogeneous monthly subscription contracts, the portfolio approach is generally acceptable and significantly reduces the compliance burden. For large enterprise contracts with bespoke terms, individual contract accounting is expected by auditors. **Regulatory references**: - Ind AS 115, Revenue from Contracts with Customers: Ministry of Corporate Affairs notification (all paragraphs, particularly 9, 22-30, 31-38, 47-65, 76-94, 110-129) - Companies (Indian Accounting Standards) Rules, 2015: MCA notification dated 16 February 2015 - Companies (Indian Accounting Standards) Second Amendment Rules, 2025: MCA notification dated 13 August 2025 - Companies Act, 2013: Section 128 (maintenance of proper books of account), Schedule III (financial statement presentation) - CGST Act, 2017: SAC code 998314 for SaaS and OIDAR services; GST rate 18% - ICAI Educational Material on Ind AS 115 (published 2018, updated guidance 2026) - National Financial Reporting Authority (NFRA): constituted under Section 132 of the Companies Act, 2013; inspection framework extended to SME revenue samples from 2025 onwards [ Read as Markdown](https://treelife.in/finance/ind-as-115-revenue-recognition-for-saas-and-subscription-businesses/?format=markdown) ### Related posts: 1. 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