SaaS revenue recognition requires companies to recognize subscription revenue ratably over the service period rather than when cash is received. This is governed by ASC 606 (US GAAP) and IFRS 15 (international standards).

Example: A customer pays $24,000 upfront for a 2-year SaaS contract. The company recognizes $1,000 in revenue each month over 24 months, rather than booking the full $24,000 at the time of payment.