Technology and software businesses, usually billing across borders.
A single contract can contain a licence, an implementation service and ongoing support, each recognised differently. Where the business sells subscriptions, revenue is spread over the term rather than taken on invoice.
Most Indian technology businesses bill abroad. That brings in export conditions under GST, foreign exchange rules on receipts, and, where the customer is a group company, transfer pricing on every transaction regardless of its size.
Accounting and reporting
- Revenue recognition across development, services, licences and subscriptions
- Project accounting and unbilled revenue
- Employee and subcontractor costs, including share-based payments where they exist
- Receivables denominated in foreign currency, and their translation
- Capitalisation or expensing of development costs
Regulatory
- GST on services, and the conditions for treating a supply as an export
- Foreign exchange rules on export receipts and on payments abroad
- Tax deducted at source on payments for software, services and contractors
- Transfer pricing where the customer or supplier is an associated enterprise
Internal controls
- Timesheet and billing controls
- Approval of subcontractor engagement and payment
- Tracking of foreign currency receipts against invoices raised
- Access and change controls over the systems that produce billing data
Questions that arise
- Is revenue recognised in line with the contract and the applicable framework?
- Are foreign currency balances translated correctly and the differences recorded?
- Are the conditions for export of services satisfied and documented?
- Are transactions with group companies supported by transfer pricing documentation?