Working with Event-Based Revenue Recognition (EBBR) for Service Contracts

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.

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.

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

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.