Revenue recognition rules
Use this function to define the revenue recognition rules by company so that you can identify the amount of revenue and costs that should be recognized for a given period. The data used to calculate the recognition is based on the method, column type, and the formula defined for each column type.
The REVRC - Revenue recognition activity code must be active to take advantage of this functionality.
For a revenue recognition code has been used in either Revenue recognition or Revenue recognition validation: If a record exists for this rule with an Awaiting validation status, you need to recalculate to include the modified formula. You are prompted to erase these amounts. If you select Yes, the Awaiting validation records are erased and reset to To be processed.
If you do not erase these amounts, the status does not change and you need to manually recalculate the revenue record to include the last modifications.
See the Revenue recognition and Project management how to guides for more information.
About Revenue recognition
As a complement to the Project management (PJM) module, revenue recognition allows you to determine the method in which each project recognizes the revenue based on one of three methods:
Manual percentage entry
Percentage of costs with estimated margin at completion
Percentage of costs without estimated margin at completion
These methods, in conjunction with the project-related journal entries to the deferred revenue and cost accounts, allows the Revenue recognition function to calculate the values that should be recognized and then posted to the revenue and cost accounts.
Setup
After you have defined a Revenue recognition code in Revenue recognition rules, you can assign that code to projects in Project management. Before calculating revenue recognition for a period, you need to select the Revenue recognition checkbox in Financial snapshots. This way, you have the most up-to-date values for any of the project-related calculation such as estimated cost at completion and subsequent calculations.
Calculating and posting
When a project milestone or a performance obligation is met, you can calculate, validate, and then post the recognized amount. The Revenue recognition function is used to generate entries for a single Revenue recognition code and Project. When you want to process revenue for multiple projects, you can use the Revenue recognition validation function to process entries in a workbench format.
Refer to documentation Screen management
Header
Identification
| Revenue recognition code (field RRCC) |
| Description (field DESTRA) |
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Enter a description for the code. |
| Company (field CPY) |
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Enter or select a company. The PJTMGT- Project management parameter (TC chapter, PJM group) must be set to Yes for the selected company. |
| Calculation basis (field REVTYP) |
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Select how the revenue is calculated: Project
Dimension
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| Project (field OPPNUM) |
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Enter or select a project code to limit this Revenue recognition code to a single, open project. A project cannot be closed or new. Leave this field empty to apply this code to multiple projects. |
| Dimension type (field DIE) |
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When the Calculation basis is Dimension, you can enter a dimension type based on those linked to the main analytical ledger type. Depending on the company settings, there can be a default value for the company. |
| Analytical dimension (field CODDIM) |
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When the Calculation basis is Dimension, you can enter a value based on the Dimension type field. |
| Main general ledger type (field LEDTYP) |
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This field displays the ledger type based on the Company selection. |
| Main analytical ledger type (field ANALEDTYP) |
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When the Calculation basis is Dimension, this field displays the ledger used for actuals calculations. |
| Revenue recognition method (field RRECMET) |
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Select the revenue recognition method that will be associated with this Revenue recognition code:
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| Access code (field ACS) |
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Assign an access code so that the access to this Revenue recognition code that can then be controlled. |
| Active (field ACTIVE) |
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Select this checkbox to use this revenue recognition rule. If this code is not active, it cannot be used when launching a calculation in Revenue recognition calculation or Revenue recognition validation. |
Tab Definition
In this section you can define the column types and formula or you can use the default setup. Each column type is associated with a default formula that determines which tables and fields are used to calculate the value. You can modify formulas as needed using the Formula wizard. Actual revenue and Actual cost can be further refined by specifying the Account roots or selecting a list of accounts using the Multiple selection option to filter journal entries.
After a Revenue recognition code has been used in either Revenue recognition or Revenue recognition validation, you can no longer modify the Revenue recognition method or the formulas.
Column types
When selecting a Column type, the following data rules apply:
Est. revenue at completion: Amount from the estimated revenue at completion on the project
Actual revenue: Journal entries with the project number for the accounts specified in Revenue recognition rules
Actual costs: Journal entries with the project number for the accounts specified in Revenue recognition rules
Est. cost at completion: Total estimated costs from the financial snapshot with the Revenue recognition checkbox selected
Note: You can adjust manually.
Project margin percentage: (Expected revenue at completion minus estimated cost at completion) divided by expected revenue at completion
Percentage of completion (initial): Given the method, the percentage of completion standard formula is different.
Manual Percentage: Value entered in Estimated progress for the project
Percentage of costs with estimated margin at completion: This is the Actual cost or Est. cost at completion
Percentage of costs without estimated margin at completion: Actual revenue divided by Est. revenue at completion
Gross recognized revenue:
Manual Percentage: Percentage of completion multiplied by Est. revenue at completion
Percentage of costs with estimated margin at completion: Percentage of completion multiplied by Est. revenue at completion
Percentage of costs without estimated margin at completion: Actual costs
Net recognized cost: Gross recognized cost minus Actual cost or you can adjust manually.
Invoices to be issued: This column is populated if the Net recognized revenue column is a positive amount, meaning the company has invoiced more than was estimated for the period.
Sales accruals: This column is populated if the Net recognized revenue column is a negative amount, meaning the company has invoiced less than was estimated for the period.
Invoices to be received: This column is populated if the Net recognized cost column contains a positive amount, meaning the company has been invoiced less than what was estimated for the period.
Cost accruals: This column is populated if the Net recognized cost column contains a negative amount, meaning the company has been invoiced more than what was estimated for the period.
Grid Columns
| Column type (field COLTYP) |
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Select a column type:
*When you select Actual revenue or Actual costs, you can use the Edit action to define the start and ending account root or account list. If multiple accounts are needed, you can use the Multiple selection option to select accounts. See the Account root/list field help for details. |
| Column title (field NAMCOL) |
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Enter a title or you can accept the suggested column title. |
| Formula (field FRM) |
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The formula depends on the Column type selection. You can accept the default formula type or modify as needed using the Formula wizard. |
| Account root/list (field ACCROT) |
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Use this field to define the account roots or a list of accounts to further refine the formula. If the Column type is Actual revenue or Actual costs, the Edit option is available so you can define the start and ending account root or account list. If multiple accounts are needed, you need to select them individually and they are added to the Selection field in the Formula wizard separated by a comma, but there is a 200-character limit. If the list of accounts exceeds the character limit on the line, you can use the Multiple selection option. The Accounts list window opens that lists all accounts in the main general ledger or main general analytical ledger according to the calculation basis chosen. The List name is autogenerated and is the concatenation of the rule code, company and the actual column type number. You can select as many accounts as necessary with no character limit and you can export the list of accounts to Excel. If you used the Multiple selection option, ellipses within brackets ([...] ) displays in this field and you cannot add lines for the same actual Column type. If you do, you receive a blocking error.
Note: When duplicating revenue recognition rules, and the chart of accounts is different for the second company, the account list is reset, and you need to define the accounts. |
| Formula description (field FRMDES) |
Limitations
When a Revenue recognition code has been used in either Revenue recognition or Revenue recognition validation, the revenue recognition method and formula fields are disabled, and the record cannot be deleted to prevent changes after calculation has been done.
Error messages
In addition to the generic error messages, the following messages can appear during the entry :