SAP BRIM and SAP Revenue Accounting and Reporting (SAP RAR) Overview

SAP Revenue Accounting and Reporting (SAP RAR) has the following functions:

• Enables the seamless integration of sales contracts, fulfilments, and billing from multiple operational systems into SAP RAR.
• Manages contracts with diverse line items (multi-element arrangements) to comply with IFRS15/US GAAP ASC 606 for the recognition of revenue.
• Creates revenue contracts and performance obligations, and handles revenue allocation calculation.
• Creates detailed revenue postings in the subledger before making aggregated postings in the General Ledger (G/L).
• Updates information in profitability analysis with compliant postings.
• Provides information for periodic statutory reporting.

Industry examples of SAP RAR are as follows:

1. Telecommunication contracts. For example, buy a mobile for 1 EUR per month. Pay an activation fee, subscription fee, and usage fee.
2. Buy a laptop for 100 EUR, including a warranty and software upgrade.
3. Medical equipment with service maintenance and consumables.

Features of SAP RAR are as follows:

• The SAP Billing and Revenue Innovation Management (SAP BRIM) solution has to account for the resulting revenues from contracts with customers, compliant to the IFRS15 accounting standard.
• The realization of the integration into SAP RAR is realized out of SAP Convergent Invoicing, basically sending the required Revenue Accounting Items (RAIs) for order items, fulfilments, and invoices to inbound processing of revenue accounting.
• Subscription Order Management (SOM) provides revenue accounting relevant information for further processing.

SAP RAR supports compliance with IFRS15 / US GAAP ASC606 for revenue recognition, including contract liabilities and contract assets.

IFRS 15 regulation impacts companies selling hardware and services bundled together and/or running long term projects via a contract with a customer. They need to report according to the new revenue recognition rules starting January 1st 2018.

SAP S/4HANA for billing and revenue innovation management (BRIM) and an integrated SAP Revenue Accounting and Reporting help to efficiently recognize the revenue according to these new rules.

Revenue Accounting and Reporting enables you to manage revenue recognition in the 5-step process that is outlined in IFRS15/US GAAP ASC 606.

It involves the following high-level steps:

Identify the contract with the customer

In this step, you create revenue accounting contracts corresponding to operational contracts and documents that are created on a back-end operational system.

Identify the separate performance obligations in the contract

In this step, you identify which performance obligations are included in the contract. Performance obligations are created for items in the operational document and manage their relationships with each other.

Determine the transaction price

In this step, you determine the total contract-price by aggregating the amounts of the pricing conditions passed on from the back-end operational system.

Allocate the transaction price to the individual performance obligations

In this step you distribute (usually on the basis of the stand-alone selling prices) the total contract-price across the individual performance obligations as allocated revenue to be recognized in the future.

Recognize revenue when a performance obligations is satisfied

In this step the fulfilment of a performance obligation (like the delivery of a physical product or a service made available for the customer) triggers the recognition of the allocated revenue in your financial books.

1. Calculate total contractual/transaction price.

2. Calculate total Standalone Selling Price (SSP).

3. Calculate the relative SSPs of each item.

4. Allocate the total contractual/transaction price to the individual items on the basis of their relative SSPs (80% of 1200 and 20% of 1200).

5. Recognize revenue under IFRS15 in the first month (hardware is delivered -> 960) (first month of subscription is fulfilled -> 240/24 months = 20)

6. Check and compare revenue under the old rules IAS 18.

Performance Obligations (POB) represents the company´s contracted obligation to deliver products or services to the customer.

• Order Items:

  Generation of an Revenue accounting order triggered by Provider Contract

• Fulfillment Items:

  Periodic fulfilments for time-based performance obligations (e.g. Rec)

  Usage based fees based on actual consumption

  One time fee for activation

  Sales order delivery for hardware or other physical products.

• Invoice Items:

  1. Recurring Fees
  2. Consumption Based usage
  3. One-time fee for one off charges
  4. Hardware invoice
  5. When relevant reversal invoices

SAP RAR then processes POBs to generate IFRS15 or US GAAP ASC606 compliant revenue postings in the general ledger.