Name: Configuring event-based revenue recognition for SAP S/4HANA Cloud Financials
Uploaded: 2022-6-10
Duration: 596 s
Description: In this Microlearning you learn how to configure event-based revenue recognition.You might also be interested in watching An Introduction to Event-based Revenue Recognition.

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<div><div><div>In this Microlearning you learn how to configure event-based revenue recognition.<br>You might also be interested in watching <a href="https://learning.sap.com/videos/an-introduction-to-event-based-revenue-recognition-sap-s-4hana-financials" rel="nofollow noopener noreferrer" target="_blank">An Introduction to Event-based Revenue Recognition</a>.</div></div></div>

Configuring event-based revenue recognition for SAP S/4HANA Cloud Financials

Hello and welcome to this microlearning for SAP S/4HANA Cloud for Finance. My name is Johannes Haselmayer and I work as a consultant in the S/4HANA Cloud MEE team. In this video, I will give an overview on the configuration settings in event-based revenue recognition that you need to be aware of during an implementation. This microlearning builds up on the Introduction to Event-based Revenue Recognition microlearning. The agenda will cover two parts today. First, I want to quickly summarize the key learnings from the Introduction of Event-based Revenue Recognition microlearning. Before we will jump to a deeper level, where we will look at the configuration settings that you need to execute during an implementation. In this part, we will also jump directly into the system. The main principle of revenue recognition is that cost and revenue are recognized simultaneously. To ensure this, revenue recognition is incorporated into the universal journal. and all the data from ACDOCA table can be processed by revenue recognition in real time. Consequently, this leads to automatic accrual and deferral postings after initial cost or revenue postings. The question how much revenue and cost is recognized at a certain point in time can be answered by the revenue recognition key, which is assigned to a revenue recognition method. S4HANA Cloud pre-delivers several revenue recognition methods, such as cost-based percentage of completion, revenue-based percentage of completion, or completed contract. All in all, we can say that with revenue recognition, proper margin reporting across the periods is made easier. Let's look at the relevant configuration settings in revenue recognition. We already talked about the revenue recognition keys and how they are relevant to determine how much revenue and cost is recognized at a certain point in time. Furthermore, we know that there are multiple revenue recognition keys that can be selected. In the customizing area, we need to define a default revenue recognition key for a specific scenario. Also, we mentioned that every posting to ACDOCA can be processed by event-based revenue recognition in real time. But how do we tell the system for which posting it needs to post an automatic, accrual, or deferral journal entry? In the customizing area, sources for revenue recognition are defined. Once an initial posting hits a specific source, the system checks whether the initial posting went to a G/L account which is either directly defined in the source or which is part of a cost element group that is assigned to a source. Based on that, the system knows for which postings it needs to perform automatic accrual and deferral postings. In another step, the sources are assigned to assignment rules, and for each source of one specific assignment rule, you can define the G/L accounts to which the system posts the accrual or deferral posting. And lastly, it is possible to define different revenue recognition keys for each ledger. By nature, the revenue recognition key is ledger independent, but if you are using a different basis of valuation in both ledgers, you can define ledger-specific revenue recognition keys as well in customizing. After this theoretic input about configuration settings, let's dig deeper into the settings by jumping to the system. Our journey either starts within Manage Your Solution or Central Business Configuration, depending on which kind of system landscape applies to you. We are starting in Manage Your Solution, but everything that we will look at now is equal in Central Business Configuration as well. I have already filtered for the revenue recognition area in Manage Your Solution, where we can see all the relevant configuration settings that we will look at now. The biggest configuration step is the Maintain Settings for Event-based Revenue Recognition. This step incorporates all the sources and account determination for all the scenarios. Steps two to five cover the derivation of default revenue recognition keys, which are derived from each scenario. If we navigate to the derivation of recognition key for self from stock, we can see how a recognition key is defined. In principle, the recognition key is dependent on the company code, item category, and eventually even on the material. Most of the time, customers define their recognition key based on item categories. And this is also how S/4HANA Cloud is pre-delivered. That would mean that once a specific item category in a specific company code is hit from the system, the defined recognition key is derived as a default value. Most of the time, definition of recognition keys based on item categories is sufficient. But if customers want different recognition keys for specific materials, they can specify that, just like you can see it with material SMIF01. As you have just seen, the recognition keys are, in principle, independent of ledgers. However, you might use one IFRS ledger and one ledger with German GAAP, and the accounting principle is required to have different recognition keys. To support this scenario, you can use the Define Replacement Rules of Recognition Keys configuration step. In this configuration step, you can define a replacement recognition key once a combination of a counting principle and recognition key is hit. So if one of your ledgers is German GAAP and the default recognition key for self-run stock is SFS, the system would replace SFS recognition key with SFS CCM, which is the completed contract method. Let's go back to the overview of configuration steps. The only step that we didn't have a look at so far is the biggest one, Maintain Settings for Event-based revenue Recognition. If we navigate to this configuration step, we first need to look at the dialog structure on the left side of the screen. I already mentioned the sources and how they are important to determine for which postings the system needs to post automatic accruals or deferrals. Let's make an example for that. If a goods issue is posted within the sell from stock scenario, the source COGS, cost of goods sold, is triggered. Now, the system checks what is assigned to the source. You can either assign a cost element group or G/L accounts to a source. In our example, three G/L accounts are assigned to this source. This means that only if the initial posting of this source goes to one of the mentioned G/L accounts, the system will automatically post a second journal entry, which is the accrual or deferral posting. If you find cost element groups in here, the same principle applies for all the G/L accounts, which are assigned to the cost element group. Let's go back to our dialog structure of the configuration step. The second important part I want to highlight is around the assignment rules as they cover the account assignment part of revenue recognition. An assignment rule is always assigned to a specific revenue recognition key. SFS recognition key for example is assigned to SFS assignment rule, which is an easy mapping. But once you're not so sure which assignment rule is assigned to your recognition key, you can also find that out from the recognition keys part of the dialog structure. To see the account determination of the assignment rule you need to click on assign sources and posting rules. On this screen, you can see to which accounts the system posts when a specific source is triggered. All the account determination comes pre-delivered, and we recommend you to make as little changes as possible in this area. However, you might want to especially focus on the sources of revenue recognition for new G/L accounts that you have created. Please have this in mind during an implementation. This concludes the demo. Back to the presentation. Let's summarize the key learnings. You have understood how to maintain default revenue recognition keys and how to make them ledger specific by defining a replacement rule. Furthermore, you know the remaining configuration settings which need to be executed during an implementation of revenue recognition. For more knowledge on SAP S/4HANA Cloud, please check out the offering of openSAP courses and learning journeys on the respective websites. If you are interested in a generic overview on revenue recognition, please also take a look at the Introduction to Event-Based Revenue Recognition microlearning and the detailed SAP Hub documentation. Thanks and goodbye.