Accounting Annual Recurring Revenue Calculator FAQ
Answers to common questions about ARR calculations, retention metrics, inputs, and reporting assumptions.
Use these answers to understand what the calculator measures, how to classify ARR movements, and how to interpret the resulting recurring revenue metrics.
General ARR questions
Core definitions for recurring revenue reporting.
What is ARR?
ARR is the annualized value of predictable recurring subscription or contract revenue. It generally excludes one-time fees and non-recurring services.
Is ARR the same as recognized revenue?
No. ARR is an annualized operating metric, while recognized revenue follows the organization's revenue-recognition policies.
Can ARR be calculated monthly, quarterly, or annually?
Yes. The reporting period can vary, but all movements must be measured consistently and annualized where appropriate.
Inputs and classifications
How the calculator separates recurring revenue movements.
What counts as new customer ARR?
New customer ARR is recurring revenue from customers acquired during the reporting period.
What counts as expansion ARR?
Expansion ARR is additional recurring revenue from customers that were already in the opening customer base, such as upgrades, cross-sells, or higher contracted usage.
What is contraction ARR?
Contraction ARR is recurring revenue lost when an existing customer remains active but reduces its recurring commitment.
What is churned ARR?
Churned ARR is recurring revenue lost when a customer cancels or does not renew.
Should one-time setup fees be included?
Usually no. They are not recurring contract revenue and are commonly tracked separately from ARR.
Growth and retention calculations
What the main output metrics show.
How is ending ARR calculated?
Beginning ARR plus new customer ARR and expansion ARR, minus contraction ARR and churned ARR.
What is net new ARR?
Net new ARR is the total change in ARR during the period after all additions and losses.
What is the difference between GRR and NRR?
GRR excludes expansion and shows ARR retained after contraction and churn. NRR includes expansion from existing customers but still excludes new customer ARR.
Why can NRR be above 100%?
It can exceed 100% when expansion from existing customers is larger than their contraction and churn.
Accuracy and reporting use
Practical considerations when using ARR outputs.
How accurate is the calculator?
The arithmetic is direct, but the usefulness of the result depends on accurate source data and consistent ARR classifications.
Should ARR be compared across currencies?
Use a consistent reporting currency or apply a documented currency-conversion method before comparing periods.
Can this calculator be used for formal accounting statements?
It is an estimate for internal analysis. Formal financial reporting should follow the organization's applicable accounting policies and review process.
How do you calculate ending ARR?
Ending ARR equals beginning ARR plus new customer ARR and expansion ARR, minus contraction ARR and churned ARR.
Explore Related Questions
Ready to see what you can calculate?
Open the calculator and get personalized results in seconds.