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HomeRevenueRevenue recognitionConnect platforms

Revenue Recognition for destination chargesPublic preview

Learn how Revenue Recognition works with destination charges.

Revenue collected with application_fee_amount

If the destination charges collects fees with application_fee_amount, the charge and transfer happen immediately, and the application_fee_amount is immediately recognized as the revenue.

In this example, the application_fee_amount="200" is set on the charge.

  • On January 15, the full charge amount of 10 USD is added to your platform account.
    • 10 USD is transferred to the connected account.
    • The 2 USD application fee is transferred back to your platform.
AccountJan
Revenue+2.00
Cash+2.00

Revenue collected with transfer_data[amount]

If the destination charges collect fees with transfer_data[amount], the charge and transfer happen immediately, where you subtract your platform’s fees from the charge amount, then pass the result of this calculation as the transfer_data[amount]. The platform’s fees are immediately recognized as revenue.

In this example, the transfer_data[amount]="800" is set on the charge.

  • On January 15, the full charge amount 10 USD is added to your platform account.
    • 8 USD is transferred to the connected account.
    • The 2 USD is recognized as the revenue.
AccountJan
Revenue+2.00
Cash+2.00

Loss and contra revenue with issuing refunds

When collecting fees with application_fee_amount

If the destination charges issue refunds, by default the destination account keeps the funds that were transferred to it, leaving the platform account to cover the negative balance from the refund. The refund amount is booked as the ConnectTransferLoss.

In this example, the charge collects fees with application_fee_amount, and it is fully refunded in February.

  • On January 15, the full charge amount of 10 USD is added to your platform account.
    • 10 USD is transferred to the connected account.
    • The 2 USD application fee is transferred back to your platform.
  • On February 21, the full charge amount 10 USD is refunded.
AccountJanFeb
Revenue+2.00
Cash+2.00-10.00
ConnectTransferLoss+10.00

If the platform account sets reverse_transfer=true and refund_application_fee=true when calling the refund API:

  • If the transfer reversal succeeded, the ConnectTransferLoss is canceled out by the transfer reversal.
  • The refunded application fee is booked as contra revenue.
AccountJanFeb
Revenue+2.00
Cash+2.00-2.00
Refunds+2.00

When collecting fees with transfer_data[amount]

In this example, the charge collects fees with transfer_data[amount], and it’s partially refunded in February and March.

  • On January 15, the full charge amount of 10 USD is added to your platform account.
    • 8 USD is transferred to the connected account.
    • The 2 USD is recognized as the revenue.
  • On February 21, the partial charge amount 4 USD is refunded, and a proportional amount of the transfer 3.20 USD is reversed.
  • On March 10, the partial charge amount 6 USD is refunded, and a proportional amount of the transfer 4.80 USD is reversed.
AccountJanFebMarTotal
Revenue+2.00+2.00
Cash+2.00-0.80-1.20
Refunds+0.80+1.20+2.00

Best practices for effectively accessing the feature

Audit the destination charges journal entries

You can select the platform fee ID, platform fee refund ID, transfer ID, transfer refund ID, and charge destination ID columns when downloading the CSV reports format by invoice or line item.

Revenue recognition report columns for the destination charges

The month summary reports contain new items Revenue from platform fees and Less refunds from platform fees—you can find the details in the month summary section.

Revenue recognition month summary items for the destination charges

Check if your accounting period is open or closed when you’re added to the private preview

It generates corrections if the private preview is retroactively applied to transactions from past (closed) accounting periods. If you want to avoid this, reopen your books by opening your accounting periods prior to gating into the private preview.

Destination charges exclusion rule

If you’re on destination charges exclusion rule, you can either delete the exclusion rules or set an effective period end date to apply the feature.

Revenue recognition exclusion rule for the destination payments
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