The Three Layers
CARR
Contracted ARR: the annualized value you booked at the deal’s signing date.
Live ARR
The portion of CARR that is actually live, after the onboarding activation curve.
Recognized revenue
The monthly P&L revenue, derived from the active Live ARR balance.
Activation curve
The shape that maps a booked deal to the months its revenue goes live.
Activation: From CARR to Live ARR
A deal is booked as CARR at its signing month, but the revenue may not go live immediately. An activation curve spreads that booked amount across the months after signing: an instant curve activates it all at once, an onboarding curve activates it over several months. You set activation assumptions per cohort (by stream, segment, or motion), and the most specific assumption wins.The default “Instant” activation curve makes Live ARR equal CARR at every account-month. You only see a gap between booking and live revenue once you assign an onboarding curve, so existing plans are unaffected until you opt in.
Recognition: From Live ARR to Revenue
Under the ARR-balance recognition model, recognized revenue in a month is the active Live ARR balance divided by twelve, the run-rate model an FP&A team uses for subscription revenue. Churn and contraction are real negative movements that cancel forward, and re-engagement adds fresh positives, so the recognized stream always reflects the live balance. The result posts into the GL tagged as revenue-derived, with lineage back to the underlying events, so you can drill a recognized number down to the customer and the contract behind it.Optional: Service and Subscription Split
You can split recognized revenue so that a new deal’s implementation portion and recurring portion post to different GL accounts with different timing, and upsell routes to its own account. The split percentage and the per-portion timing are user-controlled per version and overridable by region, product, or segment. A version with no split policy behaves exactly as before, so this is opt-in.CARR vs Live ARR vs Recognized Revenue
| Measure | What it answers | Nature |
|---|---|---|
| CARR | How much have we contracted? | A balance, recognized at signing |
| Live ARR | How much is actually live right now? | A balance, after activation lag |
| Recognized revenue | How much revenue do we book this month? | A monthly P&L flow |
Common Questions
Why would Live ARR be lower than CARR?
Why would Live ARR be lower than CARR?
Because of the activation lag. A deal signed this month may take a few months to onboard and go live. Until it activates, it is contracted (CARR) but not yet live (Live ARR). With an instant curve there is no gap.
How is recognized revenue calculated for subscriptions?
How is recognized revenue calculated for subscriptions?
Under the balance model, it is the active Live ARR balance divided by twelve each month. This is the SaaS run-rate view, distinct from spreading each event over a fixed term.
Can I drill a recognized revenue number to its source?
Can I drill a recognized revenue number to its source?
Yes. The recognized revenue drill goes period, then customer, then the Live ARR activation slices, then the underlying contracted events, and opens the contract behind them.
Do delayed go-live deals work?
Do delayed go-live deals work?
Yes. A planned deal with an explicit calendar go-live date books CARR at its booking month and activates fully to Live ARR on the go-live date, bypassing the activation curve. Recognized revenue then starts at go-live.
Where do I set activation and churn assumptions?
Where do I set activation and churn assumptions?
In ARR Studio, alongside the driver, target, and churn-plan levers. Recognition schedules per stream live in revenue Assumptions.
If the Numbers Look Off
- Recognized revenue is lower than you expect right after a big booking: check the activation curve. An onboarding curve delays the deal going live, so recognized revenue ramps up rather than jumping.
- Live ARR equals CARR everywhere: you are on the default instant curve. Assign an onboarding activation assumption to model a lag.
- Recognized revenue reads zero for a forecast period: the engine reads Live ARR slices, which the forecast run populates. Re-run the revenue forecast so activation and recognition regenerate in order.
- A service or subscription split looks wrong: confirm the split policy’s percentages sum to one and that the target GL accounts exist; an immediate service portion recognizes once, not every month.