A contract’s value normalised to a one-year period. Teams should state whether their definition includes one-time charges. It answers how large a contract is on an annual basis, which is useful when comparing different contract lengths.
An example
A three-year subscription worth S$180,000 in recurring fees has recurring ACV of S$60,000. A separate S$9,000 setup charge may be excluded or annualised, depending on the reporting definition, so state the method.
What to check
ACV definitions differ. Compare like-for-like scope and use one agreed definition across reporting and approvals.
In practice
ACV can hide a changing price schedule. A contract charging S$40,000, S$60,000 and S$80,000 across three years averages S$60,000 annually, but each year creates a different revenue and billing position.