Revenue recognition design

[Former Member]

Hello everyone,

I'm trying to design a revenue recognition model for my client, based in what he wants.

They only create sales order for service material (not delivery relevant) and normaly with a milestone billing plan.

After the sales order creation they want to post reveneu recognition as follows:

- Every week (one day) they will post the revenue for a specific value that tehy will only now that specific day. So Time-related rev. rec (A) is ruled out because the value to be recognize is unkown until the day to be recognize.

- Also they will post the revenue recog. the last day of the month (again, the value to be posted is unkown till that day).

- The last one: they want to be able to post revenue recognition at any time for the value they want.

Service based rev. rec. based in an event looks good to me, but I don't know how to manage those events.

Any help is very welcome.

Regards.

Eduardo

[Former Member · Accepted solution]

Hi,

We have also the same scenerio where Service-Related Sales Order are booked.

Here, We Recognize Revenue (Accrued Income) based upon Deliveries, happened in a particular month.

o Do so, we do delivery of Service Material and at a particular day (last day of the month), we run VF44 and Accrue the income.

If, this seems something of your concern, we can discuss further.

Best Regards,

Amit.

[Former Member · Accepted solution]

Hi Amit,

Thanks a lot for your answer!

It sounds like a right way to do it but, do you need to post the goods issue or you just create the delivery?

So what you actualy do is:you have service related material but delivery is allowed in order to be able to recognize the revenue you need, right?

So the process is as follows:

- Create sales order for 1000 eur

- When you need to post revenue recognition for 300 eur what you do is:

+ Create a delivery for 300 eur

+ VF44 for that delivery

Am I right?

Regards,

Eduardo

[Former Member · Accepted solution]

Hi,

Yes, absolutely right.

We do create delivery and PGIed it.

End of the month, we run VF44 and do Collective Processing, based upon delivery docs., happened in that particular month.

The same has been appreciated by SAP A.G.(Germany)

Best Regards,

Amit

[Former Member · Accepted solution]

Ok Amit, thank you very much!

Just one more thing (I hope I'm not bothering too much). How (using service materials) do you make goods issue and deliveries?

Do you use a standard sales order or a service one?

Best regards,

Eduardo

[Former Member · Accepted solution]

hi,

For service Material use Item Category TAD

In Item category Using Item type as 'A' ie value item

Billing Relevance 'B' ie relevant for order related billing.

Thanks

Bhushan

[Former Member · Accepted solution]

Hi,

We create Material as Type: DIEN with 4 Views:

Basic Data 1

Sales: Sales Org. Data 1

Sales: Sales Org. Data 2

Sales: General/Plant Data

Whereas, We have a Z-copy of Standard Order - OR with reference mandatory.

For more clear picture, I request you to please go through each link in:

Spro --> IMG --> Sales & Distribution --> BAsic Functions -->Acct Assgn/ Costing

--> Revenue Acct Determination

--> Revenue recognition

There you will find what Are all item Cat. and Mat Acct Assgn Groups are maintained for rev recog. You may create your own, also.

Once, gone-through with the all relevant links, Please revert for more clearification, If reqd.

Best Regards,

Amit

[Former Member · Accepted solution]

Hi,

Thanks for everything!

I finaly got it right.

Best regards,

Eduardo

[Former Member]

Hi Eduardo,

Revenue recognition is basically a different way of posting to the general ledger - G/L.

At the first posting the values are posted into a deferred revenue account and a provision account

When you recognise the revenue (at whatever intervals) the system "automatically" adjusts the G/L, posting to the actuals revenue account.

The explanation above is not financially sound but I tried to put it in simple terms.

Now, this has nothing to do with the actual values, the process is always the same.

If the issue is that they don't know the actual revenue amount until a certain point in time, than what is being suggested is that you allow certain users to adjust this value manually at 2 points in time:

1 - First postings

2 - Revenue recognition time

Hope this will help

[Former Member]

Hi,

This can be done by changing the condition value at the item level for each time when they want to bill. Make the condition type open.

Thanks

Krishna.

[Former Member]

Hi Krishna,

Thank you very much for your answer.

Could you be a bit more specific? I don't know exactly what you mean.

Regards,

Eduardo