Deferred Revenue Haircut

A deferred revenue haircut is an accounting adjustment in which a portion of deferred revenue (undelivered payment) is reduced (haircut) to reflect risks like refunds or cancellations.

For example, a gym sells its annual membership for $600. The gym can’t count it as immediate revenue; it must be recognized over the year. Expecting cancellations, they may note down $500 upfront, applying a “haircut” to the revenue.