GAAP Invoicing and Revenue Recognition EITF 00-21
Does anyone out there have any experience with GAAP invoice and revenue recognition rule EITF 00-21, dealing with Multiple Element Arrangements?
This is the scenario where a contract or sales orders includes support or service that is packaged with a product, therefore customer sees its price as $0; however, when is comes to revenue recognition, vendor needs to account for the revenue according to the typical price for the support or service and percentage of the total contract or sales order.
This would be something that is imlpemented in Advance Pricing, Order Management and AR.
Thanks!!
Similar Messages
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Data Migration of Contracts with periodic billing and revenue recognition
Hello Experts,
I am trying to develop a legacy data migration plan for Contracts with periodic billing plan and revenue recognition.
Example of the scenario is given below:
Customer signed a contract for one year starting 01/01/2009.
Customer is billed quartely, billed in advance.
SAP going live on 04/01/2009
Customer is billed for 3 months and also for initial set up fees.
Revenue recognition is done monthly.
We have to migrate this contract to SAP.
Billing document posting may be necessay as it affects revenue recognition which spans across the total contract period.
Any ideas how to do this?
Thanks A Lot
Anil
Edited by: Anil Jose on Sep 17, 2008 9:38 PMHi Anil
How did you manage this? We also had the same problem in one of our contracts and what we did was that we copied the contracts from the legacy with the full value. That is suppose SAP went live on 1st April, 2009 and the contract was created on 1st January 2009 for a value of suppose 100 USD, with the first billing being done on 1st Jan for 33.33 USD for 4 months. We first created the contract with a validity from 1st Jan 2009 in the new system. We billed it with a billing type that we created that did not actually create new accounting entries as the accounting entries had already been created in the legacy system. In the new system then we recognised the revenue till the go live, so that the actual value remaining of the contract reduced. Then we started the billing plan of the contract from 1st of April 2009 for the remaining amount. So next invoice was created on 1st april for 33.33 USD. Can you share your solution.
Regards
Indranill -
Sales Order Progress Billing and Revenue Recognition
I need some suggestions to take care of a progress billing and revenue recognition requirement. Billing and revenue recognition need to happen in parallel but on totally different schedules. Here's a sample scenario that I'd like to set up OM and AR without customization to do the following:
Sales Order $100000
Billing
Jan 06 $25000
Feb 06 $60000
Mar 06 $15000
Revenue Recognition
Jan 06 $20000
Feb 06 $30000
Mar 06 $40000
Apr 06 $10000Hi
There is no standard functionality that support integration of Order Management and Oracle Projects Billing.
In Projects you can generate revenue based on progress. There is a form in Projects, where user may enter once a period the percentage of progress for the project.
You may want to setup the project with revenue distribution rule as event, and assign a progress based billing extension to the project.
You should develop your own code to generate projects invoices for items delivered from OM. A custom code could be loading events using API, an event for each shipment transaction in OM. Note, if you are going to generate invoices from projects, you should avoid interfacing the transactions from OM to AR, to prevent double accounting.
Dina -
Revenue recognition job hangs and needs reboot of servers
We are on SAP BPC v7.0 SP6.1, using Microsoft Office 2007 and Internet Explorer 7. We have two environments - Production and QA. Production so far is running fine; QA is on a smaller environment.
I am an application user and load final production files into QA each month. For the past two months when trying to run the revenue recognition job for April 2010 and again for May 2010, the job just hangs where it would normally take about two minutes to complete. Both times it was the only job running at the time, as no one was using the QA environment. I had to terminate the job (which might leave the job running in the background) and have our Server team reboot our two servers (Application and SQL Server Analysis Services). Then the revenue recognition job completes.
Depending if I terminate and resubmit the revenue recognition job, I might get the following detail log message:
Execute formulasError
Failed to commit transaction
1 errors writing data
Send through SendGovenor failed
Last week, our DBA set the QA databases to Simple instead of Full recovery and shrank the transaction log files. I ran a test revenue recognition for July 2010 and the DBA tried to monitor the environment, but he could not see any job committing or any activity on the database. I ended up rebooting our servers to complete the test.
Has anyone experience similar problems and was able to resolve it. Any ideas would be appreciated. Thanks.
BuckyHi Sorin Radulescu,
I load the initial billing file using the Import logic script and select the data file and transformation file. I click on the Merge data values option; click No to run default logic; and click No, do not check work status settings. Once the import completes, I run the revenue recognition logic for the accounts and periods I am working with.
I compared our Production transformation file, default logic script (which I am not running), and revenue recognition logic script to QA and they both match. My problem is when I run the exact same revenue recognition job in QA, the job just sits in running status but should finish in a couple of minutes. I would let it run for a couple of hours in QA, then terminate the job and have our two servers rebooted, then the same revenue recognition job runs to completion within a couple of minutes.
I am just wondering if there could be some other setting that does not let the job submission kick off the actual update to the database. To make sure the database was not hosed from the terminated revenue recognition job, I ran a different but smaller job and it completed. Then I would ask for the reboot and resubmit the revenue recognition job and it completes.
I will let our DBA know about monitoring the dllhost.exe for amount of memory used. But the last time he tried to check for any activity on the database he could not see anything, but I do not know if he was checking dllhost.exe or some other files.
Thanks for your response and suggestions. Since this is our QA environment (which I try to keep current with Production), I am trying to see if I can identify the cause and fix it, in case it carryover to our Production environment.
Regards,
Bucky -
HELP: AR Open Invoices Conversion with Revenue Recognition (Daily Revenue)
Hi,
I need some help on Conversion of AR Open Invoices with Accounting Rules in R12, Here the client wanted to use Daily Revenue Schedule rule,
I am developing Functional Specification Document (CV.040); Need to understand the Assumptions, Approach and Which data needs to be extracted from Legacy System.
Appreciate your reply at the earliest
Thanks
RaviAnil,
Thanks for your response, Here are the answers to your questions.
1) The invoices that you want to convert - Do they already have revenue recognition on them?
Ans: Yes they have Revenue Recognition On Them.
2) Are you bringing only Open Invoices? What about Invoices that are closed (paid), but still have unrecognized revenue on them? DO you want to bring them
over? If no, how will be mage the recognition of those invoices?
Ans: We want to bring only Open Invoices. i.e the following scenarios want in Data Extraction
a) Invoice is Fully Paid (REC is Zero) and Unearned is Full Invoice Amount, Revenue is 0
b) Invoice is Partially Paid (REC is Partial) and Unearned is Partial, Revenue is partial
c) Invoice is fully Paid (Rec is Zero) and Unearned is Partial and Revenue is Partial
d) We do not want to bring the invoices with Fully Paid and Fully Recognized, Unearned is Zero
3) What about partially paid invoices? How do you want to bring them in?
Ans: See above scenarios.
4) Do you want to bring in all Invoice details,or just bring in a summary line with the outstanding amount?
we assume only Summary, but if the Invoices with Several Lines and Different Accounting Rules, We may have to bring them too
Appreciate your response; Suggest some possibilties?
Thanks
Ravi -
Posting taxes and revenue account seperately in invoice
Dear Team,
As per our client requirement, they want to post taxes immediately at the time of invoice creation. However, they want the revenue recognition after some time/days of invoice creation. This is requirement of revenue recognition for aerospace industries.
Could you please suggest any possible configuration/development.
Thanks and regards,
Suhasit applies to only few materials on a sales order as items
and with only 1 specific item category
This should have been posted in sales forum.
Better go with a new pricing procedure with new sales / billing document types based on which, the requirement can be met. Hope, you know the basic SD configurations like assigning pricing procedure to document type etc., based on which, system will trigger the required pricing procedure when you create a sale order.
thanks
G. Lakshmipathi -
Revenue Recognition Tied to Invoice
Hi All,
We have a following requirement to meet for our revenue recognition process. I would like to know if it is possible to achieve in version 11.5.10.2.
Currently in Oracle 11i (11.5.10.2), revenue recognition is tied to invoices. We have created accounting rules, and invoicing rules to recognize the revenue. However, since the revenue recognition is tied to invoice, we are facing the following problem.
For Example, We have a contract spanning three years duration with the total contract value of $300,000. The client pays $50,000 in first year, $100,000 in second year and $150,000 in the final year. As per the functionality in 11i, our first year revenue recognition is breaking into $4166.66 every month ($50,000/12 Months), second year revenue breaking into $8333.33 ($100,000/12 months), and the third year revenue breaking into $12,500 every month ($150,000/12 Months). Instead of this, we would like to recognize the monthly revenue as $300,000 / 36 Months, even though the invoice schedule is as mentioned earlier (50k invoice in the 1st year, 100k invoice in the 2nd year, and 300k invoice in the 3rd year).
1. Is this functionality/requirement possible to achieve in 11i ? with or without customization? if with customization, please provide details on what API/package/process/setups to be customized?
2. Is this functionality/requirement already available in R12? partially achievable or completely achievable?
Any suggestions/inputs will greatly help us.
Thanks.
AbmHi Abm,
You have rightly mentioned in your first note that the revenue recognition is tied to the Invoice. At given time, the amount of revenue recognized on an invoice is always less than or equal to the Invoice Amount. So, in order to recognize the revenue, you need to have an invoice.
You have mentioned in your previous note that you may generate one or multiple invoices in a year and no mater how many invoices you generate, you still want to recognize 8333.33 (i.e. 300,000/36) each month. As per standard functionality, this is not possible. Reason - Revenue Recognition is based on the Invoice and the Invoice amount. Your requirement actually gives rise to another question. If you havent invoiced the customer in the first month, what will be the accounting entry for the revenue recognition of $8333.33?
I can think of some workable solution, but first I need to understand the accounting for this.
Thanks,
Anil -
Hi,
I have configured revenue recognition type "B" for my item categories and I am using BOMs where pricing is set at item level. The issue is that when I have more than one components in my BOM then I get an error message (Missing data: Provision account Message no. VU019) at the time of saving sales order though I have configured the provision account. However If I enter the same component/material in the sales order without BOM which will have same pricing data then it does not through the above error message. Please help what could be the potential issue.
Best Regards
JavedHave you checked the Analysis from condition tab once you created a BOM? If so, what is the message you could see for pricing.
G. Lakshmipathi -
Accrual run and revenue recog( time related revenue recognition)
Hi All,
Please let me know what are the configuration steps required to perform accrual run and revenue recog( time related revenue recognition) in R/3 when we do billing in CRM , for service contracts with start date and end date and billing plan - quarterly in advance
Required scenario:
Contract creation in Crm
Billing in CRM
Accrual Run in R/3
Revenue Recognition in R/3
can we do with the help of result analysis key and internal order .
Your valuable reply awaited
thanks
SK
Moderator: Thread locked due to cross posting.Hi
Please refer the below mentioned link
http://fuller.mit.edu/sb_support/media_lab/deferred_revenue_recog.htm
http://sap.ittoolbox.com/groups/technical-functional/sap-log-sd/intercompany-revenue-recognition-process-3042637
It may help you
Regards
Praveen P C
Edited by: Praveen Chirakkel on May 18, 2011 9:13 AM -
Hi,
we are rolling out our global SAP solution for Russia and I would like some valuable inputs from SAP Gurus to my query.
My query is regarding revenue recognition in Russia. According to local GAAP, unless a signed copy of the TORG-12 (Act of acceptance of the transfer of goods) is received from the customer, it cannot be considered as revenue for accounting purposes in Russia, whereas for US GAAP purposes revenue can be recognized once the goods have been delivered.
US GAAP is the leading ledger and Russian GAAP is the non leading ledger but it is not possible to release billing to accounting for the leading ledger only.
Another point to note is that Russian accounting is based on actuals and no accruals can be posted for revenues.
Pls. can someone provide me some insight as to how these two requirements were handled together in their projects within SAP.
We are on SAP ECC version 6 ehp4.
Thanks in advance for all your help.
Regards,
NitinDear Deepu,
The Concept of "Revenue Recognition" in Item Category is -
The material, with specified Item Category, is defined for income-accrual or not.
Now, Income-accrual means, say, in a month, you have "n" no. of orders to deliver, but might possible that Invoice and Payment, may get done or may not be.
So, to realise such income for a particular period, we run revenue-recognition (VF44). In VKOA, we maintain "Provisional Account" for such income.
Once invoiced, Accrued income G/L gets debited and Customer G/L gets credited.
[Revenue Recognition|http://help.sap.com/erp2005_ehp_03/helpdata/EN/4d/fcd139f6e4cf2ce10000000a114084/frameset.htm]
As you asked for maintaining - Type "A" in Item Cat., go through
[Time related Rev. reco.|http://help.sap.com/erp2005_ehp_03/helpdata/EN/59/aff23cd85c11d199d60000e8a5bd28/frameset.htm]
Another Type is "B"
[Service related Rev. reco.|http://help.sap.com/erp2005_ehp_03/helpdata/EN/59/aff23fd85c11d199d60000e8a5bd28/frameset.htm]
Best Regards,
Amit
Note: There are few of my posts in threads
Re: Revenue recognition
Re: Revenue recognition design
this will provide some in-sights for rev. recog. -
Revenue Recognition (AR Closed for future month in error)
Need help with revenue recognition. In the month of June in AR July was opened in error, so it was put in to close pending. Since July was closed the last 3 days worth of June invoices did not have any revenue recognition for July. Instead July's revenue was posted in to August since August was showing as a future period, and July was closed. Is there any fix to change the revenue recognition without doing a credit and rebill of 3 days worth of invoicing? If we reopen June, and run revenue recognition again, will that help? Thanks in advance for any help.
Well there are a few ways you can go ahead and fix this, but it depends on lot of factors.
Lets say you have 1 invoice for which the revenue has been recognized in August and not July, now you can query up that invoice in the transaction's workbench and incomplete it. After incompleting all the revenue recognized distributions would be deleted(applicable 11.5.10 onwards) and when you complete the invoice again & run the RR program the revenue would be recognized in July(provided it's in an open status). Please note though that you can incomplete a transaction only if it doesn't have any activity against it!
Now coming to the real world it's possible that the number of transaction's you have could be quite large and doing this manually through the screen might not be feasible. So you could possibly write a small pl/sql script to loop through those invoice's and incomplete them by calling the complete/incomplete group transaction's api. And then again complete them and re-run RR program to complete the fix.
Please note though that you can incomplete a transaction only if it doesn't have any activity against it!
With posted transaction's or transaction's having other activity, it's possible to fix them too but that would be taking things too far and Oracle Support/Development would be best equipped to provide you the fix in that scenario.
HTH,
Jasmeet. -
Price Change for Revenue Recognition
Dear experts,
I am using Revenue Recognition of type B with Revenue Recognition before invoicing.
I have an issue/question about the way price changes are treated in the functionality.
The below example is used to describe the issue for your understanding:
1.Pricing master data: $100/EA
2.Price of item in sales order: $100/EA
3.Qty in sales order: 10 EA
4.Delivery & Goods issue: 10 EA
5.Revenue Recognised (VF44) for: $1000
Accounting Entry:
DR Unbilled Accounts Receivable $1000
CR Revenue $1000
6.Change in pricing master data: $120/EA
7.Partial Invoice for: 2 EA @ $120/EA
Accounting Entry:
DR Customer $240
CR Unbilled Accounts Receivable $240
8.Partial Invoice for balance qty: 8 EA @ $120/EA
Accounting Entry:
DR Customer $960
CR Unbilled Accounts Receivable $760
CR Deferred revenue $200
9.Subsequent Revenue Recognition (VF44)
Accounting Entry:
DR Deferred revenue $200
CR Revenue $200
As you can see in the example above, the amount of the price difference is not credited to sales in step 7. From what I have seen so far the additional amount due to price difference gets credited to sales only after the total invoice value for the item exceeds the revenue recognized.
Is there any option to set the system so that the price difference is taken into account for revenue recognition during each invoicing (even
when the invoicing is partial) ?
Thanks in advance for your help.The price difference will not go to Sales in Step 7. The reason being Revenue Recognition works on the item rather than the amount. Since you have run F-44, the system finds the same in Unbilled Receivables and posts to that account.
For updating the price changes, you have to run VF46 to cancel the original RR entries. In this case, it will just clear of the RR lines if realization has not happened and post a reversal if realization has happened. This txn will also create a new RR line for VF44 which you can process.
Refer Note 820417 Implementation guide for RR. Download the attachments and look into Part2 doc page 13. This explains how to deal with price changes in sales document.
Hope this helps.
Ravi. -
Pricing procedure not to bill customer but revenue recognition
I'm looking for guidance on how to setup a pricing procedure conditions. First let me explain the situation. What happens is the customer buys say 2000 software licenses on a sales order. The customer is billed and the customer account is debited and a deferred account is credited. Now the customer activates one of the licenses. The pricing from the sales order is copied to a contract. This contract has a start and end date for the license. Now that license can start to be recognized based on the period of the line item contract dates.. The issue we have is that normally for deferred revenue billing takes places. Problem is customer was already billing on the sales order. Somehow the pricing procure has to credit the deferred account that was posted on the sales order and then credit the revenue recognition account that can be used by transaction VF44.
So on the invoice associated with the sales order Invoice from sales order
Dr Customer $1000
Cr 2370 $1000
The account 2370 is the deferred account. This part is fine.
Now we activate 1 of the licenses.
So the pricing procedure has to do the following with no billing to the custo0mer account Invoice from contract
Dr 2370 $120
Cr 2371 $120
This is the problem part. crediting the deferred account 2370 and then posting into the revenue recognition account 2371
Rev Rec – VF44 for Period1
Dr 2371 $10 Cr 4340 $10 Any ideas would be appreciatedHi
In SD billing documents customer is always debited or credited based on nature of transaction. For posting in two different G/Ls instead of customer account there is only one possible way which I know. In free goods pricing system can post debit and credit entries to different G/Ls and these G/Ls are controlled through account keys which you assign to condition types in pricing procedure.
Do you have any Idea of free goods pricing and its posting? Explore this and give it a try. I am not sure about this because I didn't test this. You can test and see if it helps.
In this for contract item category you have to use free goods pricing which you set in item category settings in VOV7.
Thank$ -
Config of billing type G2 for Revenue Recognition
Hello Experts.
I have a situation where I need to configure billing of credits for revenue recognition.
For normal builling we have copied doc type SO to ZBCS and added ZTAD item category (copied from TAD) for the RR.
To do this for credits I copied doctype CR to ZBCR and assigned ZTAD item category to it.
When billing the ZBCR not I get the message "Item category ZBCR ZTAD cannot be invoiced with billing type G2".
How can G2 be configured to allow this?
This is G2's current setup.
Billing Type G 2 C red tM e m o Created by
Number systems
No.range int.assgt. 19 Item no.increment 0
General control
SD document categ. O C re dit m emo Posting Block
Transaction group 7 B il lin g doc um ent s Statistics
Billing category
Document type DG C us tom er cr ed it me mo
Negative posting N o neg at ive p ost in g
Branch/Head office C us tom er =Pa ye r/B ra nch =s old -t o p ar ty
Credit memo w/ValDat N o
Invoice list type
Rebate settlement Rel.for rebate
AcctDetermProc. KOF I0 0 A cco unt De e rm n ato n
Doc. pric. procedure
Acc. det. rec. acc.
Acc. det. cash. set.
Acc. det. pay. cards
Output/partners/texts
Output determ.proc. Z10 00 0 B il lin g Out pu t Application V 3
Item output proc.
Output Type
Header partners FK B iln g D ocu m en t
Item partners FP B il lin g Ite m
TextDetermProcedure 03 Invo c e hea de r
Text determ.proc.itm
Delivery textHi,
You may be maually given the PR00 in ZBCR. But in your copy control (VTFA) --> item category ZTAD --> pricing type, you may be maintained B (Carry out new pricing).
If you maintain B, you have to change it to "D ".
When you maintain B, the system will search the Pricing again in Credit memo. All manual prices will be lost.
Thanks
M. Lakshmi Narasimhan -
Cost of Goods & Revenue Recognition
Dear All,
I have a typical requirement related with the cost of goods sold (COGS) G/L account & the revenue recognition.
Under SAP best practice, the COGS account is updated together with the Inventory account when post goods issue (PGI) is done.
there are 2 scenarios here -
1. Normal Sales - delivery related invoicing. Here the invoice is created immediately after the delivery. So here the revenue & cost recognition matches.
2. Project sales - PS not being used. Just created milestones using milestone billing. Here the invoice is order related with billing plan. So the milestones are
a. 50% after order confirmation.
b. 40% after delivery.
c. 10% after installation & commissioning.
Here the revenue will be generated at three stages & the COGS will be updated after delivery (PGI).
Is there any way we can update the COGS at the time of invoice in standard SAP.....?
With best regards,
Niyaz.Hi friend,
Pls use T-code OMJJ and OBYC to setting as stop update acct in PGI! I only know the location to impact about it! With update acct in Invoice, I need to verify again for! I will update when I cover it. Hope this help
Best regards,
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