I work in a SAAS business , we are mainly a re seller of software , the terms that the customer has with us and the software supplier is that they have 30 days to cancel the licence from the date they purchase regardless of the start of the licence period. For example if a customer purchases a licence on 1st August with a licence start date of 1st September they have 30 days to cancel from 1st August and not 1st September. There is no right to cancel after this date. Currently i recognise the revenue immediately and post a provision for refunds within the 30 day period based on the historical refund trends. We also purchase the licences from our supplier at the point we buy the licences regardless of when they start so that we match revenue with cost without accruing for it . If a customer renews a licence early for example in August for an October renewal they have 30 days to cancel from August and so i again recognise the revenue in August and provide for any possibly refunds within the 30 days. I am being told i must defer the revenue to the licence start dates but i am not too sure that is correct .
There is a possibility that a new sale made in July could be renewed the following June so a month early and have two revenue entries within the same Financial Year for the same customer / licence - which i understand more and would at year end defer any that have been 'double counted' in one FY, but month to month given there is no right to cancel after 30 days i dont know that i agree with having to defer the revenue. This even throws into question whether it matters if there are two revenue entries in one year for the same customer if both sets of income are earned and there is no possibility of a refund.
If anyone has any knoweldge in this area i would be grateful