Apple App Store/Google Play Revenue

Recognising revenue- how to accurately recognise revenue for subscription revenue on Apple/Google?

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Our company has launched an app on Apple App Store and Google Play. We receive monthly "Proceeds" directly from Apple/Google, this takes off any applicable taxes and fees which Google and Apple take. Essentially our customers are there Google and Apple. The proceeds derive originally from subscriptions purchased in the month for the app on the respective platforms, these subscriptions can be annual or monthly. Therefore I am unsure whether we need to defer the revenue for those annuals/monthlys each month. I have asked Apple's support to provide some guidance as our dashboard isnt user friendly.

The main question is do we need to defer the revenue or should our monthly revenue be simply the net proceeds we get each month on the basis that our customer is Apple/Google. If not does anyone have any experience doing thios before and where to get the data to accurately recognise our revenue as the dashboard gives quite limited information and their support have been of minimal help thus far!

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By David Ex
27th Mar 2024 14:45

chrispd92 wrote:
Therefore I am unsure whether we need to defer the revenue for those annuals/monthlys each month. I have asked Apple's support to provide some guidance as our dashboard isnt user friendly.

Wild guess but I doubt Apple support are familiar with accounting standards applicable to UK companies. Your accountant, however, should be, so best ask him/her.

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Replying to David Ex:
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By Brend201
01st Apr 2024 19:08

Precise answer, not a wild guess: they are of no help to app developers. They send you lots of words but they don't answer the question. Basically, how their app providers do their accounting is of no interest or concern to them. Believe me, I've asked and tried to get precise answers from them - and I've wasted a lot of time and energy getting nowhere. But just to be clear: they account correctly for the VAT that they collect on sales to UK customers.

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By Paul Crowley
27th Mar 2024 14:51

No worries
Let the accountant make an appropriate judgement come the year end. If app users cannot cancel then is it really a concern?

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Replying to Paul Crowley:
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By FactChecker
27th Mar 2024 22:33

... which is of course the key issue that OP hasn't explained.

IF Apple/Google are truly the only two customers (a fact hopefully borne out by the terms in the Contracts), then there will undoubtedly be a reference in there as to what (if any) rights Apple/Google have to claw back previously paid over revenues (for any reason - including early cancellation by end-user).

Those are the terms (along potentially with things like auto-renewal terms and/or different length contracts) that the accountant will look for before making that judgement. IF of course the sums are material in the first place.

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John Toon
By John Toon
28th Mar 2024 10:12

Google/Apple aren't your customers - they're merely a 3rd party from which they take fairly hefty fees. Your income is what the app users pay before any of these fees. If the users have options to pay annually or monthly then yes you will need to defer revenue for the annual payments.

You're right that these platforms don't have great reporting, which is why using an aggregator is usually the best way of catching info needed for reporting. They make it particularly complex dealing with VAT, GST and sales taxes in various regions which you need to be particularly aware of to avoid sleepwalking into a tax problem.

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Replying to johnt27:
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By Bobbo
28th Mar 2024 12:19

These sort of questions do make me wonder how many companies selling through platforms are grossly understating turnover (and expenditure).

Reminds me of a post on another forum where somebody was convinced that when selling through ebay what was occurring was that ebay were buying the product from their business and then ebay was selling to the ultimate purchaser.

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Replying to Bobbo:
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By FactChecker
28th Mar 2024 12:51

... which is, in essence, what Amazon actually *sometimes* does (although it's hard to discern what's going on behind any particular 'Amazon Marketplace' listed item).

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Replying to Bobbo:
John Toon
By John Toon
28th Mar 2024 14:00

Bobbo wrote:

These sort of questions do make me wonder how many companies selling through platforms are grossly understating turnover (and expenditure).

Reminds me of a post on another forum where somebody was convinced that when selling through ebay what was occurring was that ebay were buying the product from their business and then ebay was selling to the ultimate purchaser.

Sounds like a vote for MTD ;)

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Replying to johnt27:
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By FactChecker
28th Mar 2024 18:55

Would only help if eBay and their ilk played ball by generating meaningful data ... not something for which they have a glowing reputation.

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By paul.benny
28th Mar 2024 11:03

chrispd92 wrote:
The main question is do we need to defer the revenue...

Yes. Take a look at FRS102 s23, in particular 23.14-23.15.
The standard can be downloaded without charge from FRC website.

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By Brend201
01st Apr 2024 21:42

When Apple and Google pay the money to you, it is yours. You then account for it in accordance with your own accounting policies etc. In accounting terms, you should account for deferred income on your annual sub income - it doesn't matter who the customer is. Your accounting is not of interest to Apple and Google and they don't care after they give you the money. They are both hopeless at giving answers, even on stuff that they should be able to tell you about. As you correctly say, you have no further VAT liability. Technically, Apple and Google sell to the end user, deduct and remit the relevant taxes and then pay 85% of the net amount to you as commission. My understanding is that you just need to record the money you receive from them as sales at 0%.

John Toon says "Your income is what the app users pay before any of these fees." Yes, you could book the 100% as your income and then record the 15% Apple/Google share as your cost of sales. For simplicity, we book the revenue (the net amount received after deducting VAT and the Apple and Google share) to income in our monthly accounts. The net effect is the same.

In our case, we prepare monthly accounts. At year-end, we make an adjustment to defer the appropriate amount of revenue for annual subs. We calculate it on a monthly basis for the year just ended (i.e. year-end 31 December): for January, we defer 1/24 of the income that we had from annual subs for the month; February 3/24 etc; December 23/24 of the income from annual subs for the month plus half of the monthly subs for that month. This is on the basis that the subs arise evenly over the relevant month. We don't go down to individual subs. That ensures that our year-end accounts are accurate and the auditors are happy.

The information from Google is generally fairly simple: its earnings reports are for the calendar month in your own currency and they pay you about two weeks after month-end. You will need to do further analyis yourself if you want to identify which subs are new and which are renewals. Google's earnings report (e.g. PlayApps_202403.csv) lists each individual sub (monthly and annual) paid for in the month.

You are correct: Apple's dashboard is not not at all user-friendly. Its financial reports are generated for Apple fiscal periods - which are not calendar months. Their fiscal periods are for four- and five-week periods ending on a Saturday. (You spotted that, didn't you?!) They then pay you on the fourth Thursday after their fiscal period ends. They issue provisional summaries about four days into the next period but the foreign currency conversions are not final until the date of payment. As of today, the Apple figures for the February 2024 fiscal period that ended on Saturday 02 March 2024 are still showing on their system as "Total Estimated Proceeds" with an expected payment date of 04 April 2024. Apple group payments by SKU and country for each day so it is not possible to identify individual payments. However, I believe that there is a marker in their monthly file that identifies renewals after one year. Incidentally, it is possible to generate Apple sales reports for the fiscal period (via Payments and Financial Reports), as well as for day, week, calendar month and year (via Summary Sales Report in Sales and Trends Reports). I have previously tried to ask Apple why a fiscal month report did not reconcile to a calendar month report as adjusted for the relevant days at the beginning and end of the fiscal period. I failed to get a coherent answer. However, in general, they are fairly close, bearing in mind that the exchange rates jump around the place.

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Replying to Brend201:
John Toon
By John Toon
02nd Apr 2024 10:02

Brend201 wrote:

John Toon says "Your income is what the app users pay before any of these fees." Yes, you could book the 100% as your income and then record the 15% Apple/Google share as your cost of sales. For simplicity, we book the revenue (the net amount received after deducting VAT and the Apple and Google share) to income in our monthly accounts. The net effect is the same.

The net effect may be the same but UK accounting rules don't allow you to net off and the result is your accounts will be misstated by the revenue share taken by any platform you sell on. That has an impact on VAT registration, company size assessment amongst other things. Any accountant (who knows what they're doing) should point this out and suggest it is corrected.

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