Features of event-based revenue recognition

Event-based revenue recognition is enhanced in various releases of SAP S/4HANA Cloud to support different scenarios dealing with service contract management in SAP S/4HANA Cloud.
Service contracts with price adaptation items

Prerequisites for revenue recognition processing:
- The service contract item with the item category for price adaptation needs to be released.
- A billing plan needs to be created.

In the example in the figure, there is a one-year service contract with a quarterly billing plan assigned. The monthly price of the product is adapted at the beginning of the second half year from 120USD to 150USD.
01/01/2019 - 06/30/2019:
- Quarterly billing = 120USD × 3 = 360USD
- Monthly revenue recognition = 120USD
07/01/2019 - 12/31/2019:
- Quarterly billing = 150USD × 3 = 450USD
- Monthly revenue recognition = 150USD

Period 01
(1) Invoice Q1 - 360USD
(1') Defer Invoice - 360USD
(2) Revenue recognition at month end 01 - 120USD

In period 07
(9) Invoice Q3 - $450
(9') Defer Invoice - $450
(10) Revenue recognition at month end 07 - $150
The price adaptation is reflected in revenue recognition.
Service contracts with credit memos

A 6-months service contract with a quarterly billing plan assigned:
- Service contract value: 720USD
- Duration: 1st January 2019 to 30th June 2019
- Quarterly billing = 720USD / 2= 360USD
At the end of June, the service contract is fully billed and the revenue is recognized.
The billing clerk creates a credit memo based on the earlier invoice with an amount of 360USD.

Values from credit memos are considered for revenue recognition:
- For service contracts in the status fully billed and all billing documents have been posted
- With period end closing, the adjustments of revenue recognition for credit memos are carried out.
At the end of period 6, the service contract is fully billed and the period-end closing is completed for period 6:
(1) Credit memo 360USD
(1') Revenue adjustment for credit memo 360USD
(2) Clearing of deferred revenue with period end closing 360USD
Configuration for EBRR service documents

Event-Based Revenue Recognition provides a lot of flexibility via tits revenue recognition SSCUI that is available.

With the configuration app, you can:
- Assign a recognition key to an item category and optionally to certain materials
- Unassign a recognition key to deactivate event-based revenue recognition for the maintained entries, validate only for new service documents
- Delete wrongly created entries, validate only for new service documents. It is not possible to delete pre-delivered entries.
Note: if you want to discontinue event-based revenue recognition for the existing service documents, you could change the recognition key to CCSN in the "Revenue Recognition (Event-Based) - Service Documents" app. With the period end run, the system clears the remaining balance on EBRR accounts.