Formula
ARR = MRR at month end × 12
Worked example
Figures from the sample company in every trial. Northwind Analytics (sample), September 2026.
ARR = 161,113 × 12 = $1,933,356
ARR and the numbers it gets confused with
- Contracted ARR adds signed contracts that have not started yet. It answers “what is committed”; ARR answers “what is live”.
- Bookings are the value of contracts signed in a period, often including one-time fees and multi-year totals. They measure sales activity, not run rate.
- Recognised revenue is the accounting figure under ASC 606 or IFRS 15. It follows performance obligations and includes non-recurring revenue, so it rarely equals ARR.
Why derive ARR from MRR
Adding up annual contract values works when every contract is a plain twelve-month subscription. It breaks with multi-year deals, ramps, mid-term upgrades and contracts in several currencies.
Deriving ARR from month-end MRR keeps one calculation behind every figure, so ARR, the MRR bridge and retention always agree.
Reporting ARR to a board
State the measurement date, the reporting currency and the exchange rates used. Once a month has been presented, keep that figure. If a contract is backdated later, show the change as a restatement rather than quietly updating the history.
How Revnewed calculates it
ARR is month-end MRR × 12, so it moves only when MRR moves. MRR comes from recurring line items live on the last day of the month, converted at the workspace’s rate policy.
Contracted ARR, with backlog shown separately, sits next to ARR on the overview and in the board pack.
Common mistakes
- Adding multi-year totals
- A three-year, $90,000 contract is $30,000 of ARR, not $90,000.
- Counting signed contracts before they start
- Signed-not-live revenue is backlog. Report it as contracted ARR, next to ARR rather than inside it.
- Mixing exchange rates
- Converting each contract at a different date’s rate makes ARR move for reasons no customer caused. Use one rate policy for the whole book.
- Changing history without saying so
- If last quarter’s ARR changes after the board has seen it, show the restatement and the reason.