Configuration for Event Based Revenue Recognition

The standard configuration is delivered with best practice assignment sources:

• YMC – Cost Maintenance Contract
• YD1 – Revenue Deduction-Time
• OAU – On Account Utilization
• YR1 – Revenue-Time
• YT0 – Time Recording Costs

You can add new accounts to the delivered sources or create your own sources.

Condition types define how the system calculates the estimated price of events for real time revenue recognition.

The delivered best practice assignment rules are:

• COSPPS – Periodic Services
• COSPTM - Service Time and Material DIP based
• COSTPOC - Fixed Price Cost based POC

Define the sequence of postings by chart of accounts by source:

Usage defines how the posting for the source is processed by revenue recognition. Usage is also considered during account determination.

Selecting the drop down in the usage field, you can navigate to the list of available usages that offer some additional description.

By clicking on the links in column "Scenario with Posting Example" a drop down area is displayed with a detailed description of the usage and examples.

Note

Note some usages refer to specific accounting principles, such as usage 103: Unbilled revenue processing.

GL accounts for deferrals, accruals, and adjustment postings can be defined for each combination of source and usage.

The next table contains the definition of the recognition keys. The standard recognition keys applicable to professional services projects are:

• Time and expenses:
  • SPTM
  • SPNTM
• Fixed price:
  • SPFC
  • SPFCCM
  • SPFCQ
  • SPFCR
  • SPFCTR
  • SPNFC
• Periodic service:
  • SPPC
  • SPPC1
  • SPNPC

Note

Note the accounting principle (IFRS, USAP for US-GAAP, etc) can be defined for a combination of company code and assignment rule.

Field "Billable determination method" defines when revenue is considered billable when the IFRS 15 indicator in the Document Type (next configuration table) is active.

In case "No IFRS 15 processing" is set, the IFRS indicator is overruled and all IFRS 15 functions are switched off.

In this section for each relevant accounting document (document type), attributes controlling the creation of the document can be specified, for example how multiple currencies are handled, or how potential loss is accounted for in POC recognition methods. Document types are used for the creation of accounting documents of Event Based Revenue Recognition.

Loss handling supports the manual or automatic creation and usage of provisions for imminent loss.

If the IFRS 15 indicator is set (and not overruled in the definition of the recognition keys), these functions are enabled:

• Splitting revenue adjustments into contract liabilities, contract assets, and unbilled revenue (accounts defined in the assignment rule section)
• Supporting contract assets and contract liabilities from the bundling of sales order items when using Event-Based Revenue Recognition for Sales Orders (not for customer projects).

If the indicator is not active, revenue adjustment splits just into deferred revenue and accrued revenue.

This configuration table contains the combinations of Company Code, Contract Type and Material that result in the selection of a recognition key (revenue recognition method).

The relevant contract types for customer projects are:

• PS01 Fixed Price
• PS02 Time and Expenses
• PS06 Periodic Service
• PS07 Usage Based

If an asterisk is entered in the material field, all materials are considered, so the recognition key is determined just by the combination of company code and contract type.

If the bundling indicator is set, the IFRS 15 functionality is activated for revenue recognition in sales contract items:

• Allocation of transaction price
• Splitting of liability and assets

This indicator is not relevant for customer project based EBRR.

Replacement of recognition keys can be used when a parallel ledger with different accounting rules are used in the countries the company operates.

When the selected accounting rule is detected, the original derived recognition key is automatically substituted by the replacement key.