I just joined a young SaaS startup as the finance lead. We recently signed several multi-year enterprise contracts. For these three-year contracts, I am inclined to record the full amount as deferred revenue, accounts receivable, and unbilled receivables (for the portion not yet invoiced) at the time of signing. Revenue will be recognized in accordance with ASC 606.

However, the contract's cancellation clause is quite lenient, requiring only 120 days' notice for cancellation for almost any reason (it is a very legitimate contract, but because our company is young and lacks history and financial backing, we cannot yet propose stricter cancellation requirements). Given such a lenient cancellation clause, I am hesitant about whether to recognize the deferred revenue for the second and third years at signing, concerned that this could make the balance sheet misleading.

Should we record the full three-year amount on the balance sheet at contract execution? Or should we wait until the cancellation clause lapses before recognizing revenue for the second and third years? What are everyone's thoughts on this?