Discounts reduce the transaction price according to ASC 606/IFRS 15 guidelines. Sequence supports two types of discounts with different recognition treatments.
Product-level discounts appear as negative line items within an existing line item group. They’re netted against the product’s price and recognized using the same method and service period.Example: $1,200 annual subscription with 10% discount
Standard price: $1,200
Discount: -$120 (within same line group)
Net recognition: $1,080 over 12 months using straight-line method
Worked example: Annual subscription with product-level discount
Scenario
Product: Annual subscription service
Standard price: $1,200
Product-level discount: 10% (-$120)
Net amount: $1,080
Billing: Annual in advance
Service period: July 1, 2024 - June 30, 2025 (365 days)
Recognition method: Straight-line
Revenue recognition pattern:
On invoice date (July 1, 2024): Net amount deferred
Invoice-level (global) discounts are separate line item groups with negative amounts. Sequence automatically allocates these discounts pro-rata across all invoice line items based on their standalone selling price.Example: $1,000 total invoice with $100 global discount
Line 1: $800 subscription (gets $80 discount allocation)
Line 2: $200 setup fee (gets $20 discount allocation)
Recognition: Each line recognizes its reduced amount using its own recognition method
Allocation is based on standalone selling price (SSP) - the transaction price of each line item - ensuring compliance with ASC 606/IFRS 15 standards.
This allocation happens automatically on the invoice date, so each line item’s revenue schedule reflects the discounted amount.
Credit notes reverse previously recognized revenue by undoing transactions from current revenue account balances. The reversal happens immediately on the credit note date.
When crediting specific invoice line items, Sequence reverses revenue from where it currently sits, prioritizing deferred revenue over recognized revenue.Example: $12,000 annual fee, 9 months in
Current state: $9,000 recognized, $3,000 deferred
Credit note: $6,000 refund
Journal pattern:
Debit: Deferred Revenue (-$3,000)
Debit: Recognized Revenue (-$3,000)
Credit: Billed Revenue (-$6,000)
This approach ensures deferred revenue (liability) is cleared first, then recognized revenue is reversed for any remaining amount.
Standalone credit notes work like negative invoices and follow normal recognition rules with negative amounts.Example: $500 service credit for future use
Credit: Billed Revenue (-$500)
Debit: Deferred Revenue (-$500)
Future recognition: Monthly credits as services are delivered
True-up fees use point-in-time recognition because the service period has already been delivered, ensuring immediate recognition when the shortfall is identified.
Discounts: Use product-level discounts when possible for cleaner reportingCredit notes: Review deferred vs. recognized revenue before issuing creditsOne-time invoices: Set appropriate service periods to match value deliveryMinimums: Monitor true-up patterns to optimize minimum thresholdsAll special cases maintain full audit trails and appear clearly in journal reports for transparency and compliance.
Credit grants: Revenue recognition is not yet supported for credit grants. Credit grants will not appear in journal reports or affect revenue recognition calculations. If your pricing model includes credit grants, please reach out to our team.