What is Revenue Recognition

Dear Gurus,
I would like to tell you all that I do not know anything about the term Revenue Recognition except how to spell it.
I dont have commerce background also to understand the terms like provisional account and deferred account. I have to configure and understand the Rev Rec procedure. it was decided and discussed by earlier people that certain business process would be configured with Rev Recg functionality. So you can understand my situation. I want to know the theory and also want to know how it will take place in SAP SD to recognized the revenue in the last of every month?
Please tell me the end to end process, why it is used? what are the examples? where it starts and ends?
If any document other than SAP notes please provide me.
regards,
Sanjay

If any document other than SAP notes please provide me
Have you searched this forum before posting this question ?? Many times this was discussed. Please search and still if you are not able to find any inputs from this forum, let me know based on which, I will provide links.
In fact, I am not sure whether you have gone through SAP Note 1166848 explaining configuration settings for revenue recognition. If not, go through that.
thanks
G. Lakshmipathi

Similar Messages

What is the Revenue recognition process ?

Hello Experts,
Could you explain the concept of "Revenue recognition" and what is the use of this process.
Thanks and Regards

Hi
Revenue recognition controls the posting period in which revenues are entered and their value.
Revenue recognition means that revenues can be posted in FI independently from the billing document (which normally posts to revenue accounts). This means that revenues can be posted before, during or after billing or a value that has already been billed can be distributed between various periods.
Revenues can be posted periodically or on the basis of specific events:
Standard revenue recognition means that the billing document posts directly to a revenue account. This posting is made without involving the Accrual Engine, i.e. without a revenue recognition process.
Periodic (time-related) revenue recognition means that the revenue from a sale is distributed and posted equally across the entire contract validity period. Billing posts to an accruals account here and revenues are first transfer posted to the revenue accounts in a second step.
Service-related revenue recognition means that the revenue is recognized as the result of an event such as a confirmation or a delivery. Billing also posts to an accruals account here and revenues are first transfer posted to the revenue accounts in a second step.
to know the integration with ECC click on this
http://help.sap.com/saphelp_crm60/helpdata/en/45/f004d98b8f3481e10000000a1553f6/frameset.htm
Reward if helps
Regards
Manohar

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
Ravi

Anil,
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

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 appreciated

Hi
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$

Not able to delete a delivery after revenue recognition is reversed

Hello Gurus,
We have a situation for certain Sales Order types after creation of Sales Order -> Delivery and PGI, we do revenue recognition. But there was some mistake and delivery needed to be deleted and recreated if needed. So after doing revenue recognition reversal we are reversing the PGI. After this when we try to delete the Delivery ( which would have got deleted if there was no revenue recognition process ) we get the below error.
Is it a problem with the way Revenue recognition is configured or does the standard behave like this. If the Invoice is also present in the above I am able to cancel the Invoice. If you think its a problem with the way Revenue reccognition is configured please advise.
Item 000010 cannot be deleted (revenue recognition status)
Message no. VL896
Diagnosis
The delivery or delivery item cannot be deleted.
System response
The document cannot be deleted since the delivery contains items that
reference sales document items that are relevant for revenue
recognition. When the goods issue was posted, the system created revenue
lines that had already been recognized. This means that there are
subsequent documents in revenue recognition for this delivery.
Procedure
If you no longer require the delivery or delivery item for deletion, set
the delivery quantities to zero and repost the goods issue. Make sure
that the quantity zero is allowed in Customizing for the delivery item
category. When the goods issue is posted, the overall processing status
is set to C and the delivery can be archived. Message determination
should be configured not to send any messages in this case. To make sure
that the system makes revenue corrections if there are differences
vbetween billed and recognized values, set a billing-relevant rejection
reason in the sales document item if more than one partial delivery is
allowed.
If you still want to use the delivery, adjust the delivery quantities
accordingly. Alternatively, deliver the referencing sales document item
again. Note that the sales document item cannot be delivered again if
only a partial delivery is allowed.
What are the changes I can do to Delete the Delivery?
If I cannot Delete the Delivery, Should I make the Delivery as 0 qty and create a new delivery with changed qty and do further process. Or should I reject the Sales Order and create a new sales order with exact qty and do further process.
Please advise.
Regards,
SNK.
Delivery has one line item. For the above case scenario, invoice is there for some deliveries and for some deliveries there is no invoice. Eg: SO -> DN -> PGI -> Rev Recog -> Iv or SO -> DN -> PGI -> Rev Recog. Requirement was SO was wrongly created as the qty was wrong or in some cases SO needs to be rejected. I am able to cancel Invoice. Rev recog is reversed. PGI is cancelled by VL09. Not able to delete Delivery and I get the above error. Ideally I thought since Rev recog is reversed, Delivery should have been deleted but not happening and above error comes.
SO - Sales Order DN - Delivery IV - Invoice
Edited by: sapconsultnt on Dec 16, 2009 5:06 AM

Hello,
Please review the Note 1224871 which introduced this functionality.
Regards,
Raghavendra YN

Revenue recognition

Hi Gurus,
I require help regarding revenue recognition. I have a scenario where customer pays part amount as advance payment, I have following doubts
1) If I configure revenue recognition at item category, what will be the effect in case of regular payment (non advance)
2) configuration steps for revenue recognition.
regards,
HB

I have a scenario where customer pays part amount as advance payment, I have following doubts
Just search the forum with the text "Down Payment" so that you will get lot of documentation on this topic. Take the inputs and try on your own.
configuration steps for revenue recognition
First and foremost part is you / Client have to get concurrence from SAP to configure.
G. Lakshmipathi

Service based revenue recognition (u0091Bu0092) contract with call off

I am trying to understand Revenue Recognition. I have come across the above term." Contract with call off"
Can anyone tell me what exactly this means.

Dear sap
The contract consists of items defining the individual materials, material groups, or services with prices and in many cases quantities.
An item is assigned to an item category, which defines the type of procurement (e.g. item category K for consignment, or L for subcontracting).
An item of the procurement type "external service" contains a set of service specifications. Such specifications may be hierarchically structured. The summary view of such a hierarchical structure is termed an "outline", and the individual levels of the hierarchy are referred to as "outline levels". Quantities are specified in service lines. Services can be released (<i>ordered, or called off against the contract</i>) at item level or at the level of the service line.
Thanks
G. Lakshmipathi

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 PM

Hi 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

Revenue Recognition: Fiscal/Period updated as 0000/00 for a Rev rec document created after creation of a Contract.

Hi All,
We have created a Contract/Subscription and the corresponding Rev Rec document that got posted is with fiscal/period as 0000/00.
Revenue Recognition: Fiscal/Period updated as 0000/00 for a Rev rec document created after creation of a Contract.
We have not executed VF45 or any revenue recognition process.
What amay be the reasons and how can we proceed further on this ?
Thanks,
M.Shiva Kumar

Dear Amrish,
Problem of this you did not maintain the provision account in your revenue account determination. Please go to vkoa transaction and maintatin this provisional account any account number.
eg; application: v. condition type: kofk, chart of account: int, sales org: 0001, revenue account: 89999, provisional account 788888 (something)
I hope you understood
Thanks & regards

Revenue recognition in Item category

Dear All
Can you advise what exactly is revenue recognition in item category?.
I need to enter A in the field, but the field is greyed.
Thanks
Deepu Pillai

Dear 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.

Revenu recognition options grayed up

Hi
We are facing an issue with the SPRO Revenu recognition options which are grayed up, which does not allow to select any values. We have allowed all the authorization etc. but no luck. Follows the procedure to see those option :
TC- SPRO --> SAP Reference IMG --> Sales and Distribution --> Basic Functions -->
Account Assignment/Costing --> Revenue Recognition -->
Click on Set Revenu Recognition For item Categories --> It shows the ItCa and Description column --> I click on change option and then double click any of them (eg. AES in ItCa column --> Click on change and when try to enter the value for any of the Business Data ie. 1) Rev. recognition, 2)Acc. period start, and 3) Revenu Dist (These options are grayed up and does not allow to select any the entry in fact the right check mark is also grayed up.
Any solution would be highly appreciated, as its very urgent in our production system.
Thanks and Regards
Abdul Majid

Hi Majid,
What's your client status ? Is it set to modifiable.
Cheers
Deepanshu

Revenue Recognition in BW

Hi Gurus,
We have a new requirement to perform Revenue Recognition based on custom rules within BW. Have any of you built or worked on such a solution? If yes can you please provide some useful information or documents on it?
Bit more background on this:
As per the requirement, this new solution has to read receipt and refund information from a couple of third party systems. BW will also get the contracts and customer master data. Then based on the contract start and end date and other custom rules, bw acts as a revenue recognition engine and generate and post GL entries to ECC.
Any tips or advises are greatly appreciated.
Regards

Dear Krishna
A tough one. You are making BW a transaction system. My thoughts
* Use an LSA kind of structure for your requirement . (staging DSO to bring in 3rd party details)
* Try to define the logic in the field level routines in the subsequent flow
Once you provide more details like what kind of logic are you going to implement some ideas can be given,
Work on the solution design before you put your hands on the development
Best of luck
Gajesh

Revenue recognition and error message" Missing data: Provision account Message no. VU019

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
Javed

Have 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

Revenue recognition has been executed twice

HI all
G/L Balance is not correct as below.
It looks that some of revenue recognition has been executed twice. There are both items that revenue recognition has been executed twice and items that revenue recognition has been executed once within the same sales order. I have no idea whether there is any pattern exists or not. This issue needs to be solved by today .
what could be the reason, can any one help me on this.
Thanks in advance,
Raju

Hi Raju,
Can u explain us in detail,
It can be the reason like if the revenue recog is replicating through some nightly job, there r different cases it may ran twice(relication has done twice).
Best regards
Bhupathi.

What is Revenue Recognition

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