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Example of Multiple Elements Arrangement with allocation of transaction price:
A Telco company sells a mobile phone for 1,- CU, if the customer enters at the
same time into a service contract for 24 months with a monthly charge of 19,95
CU.
The mobile phone would be sold alone for 180,- CU.
Customers can enter a similar service contract without buying a phone with a
monthly charge of 15,- CU (i.e. total charge 15,- * 24 = 360,- CU).
Revenue for the mobile phone is recognized at delivery of the phone in period 1
Revenue for the service is recognized evenly spread over the duration of the
contract of 24 months.
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This has been a long process, the governing body has taken into account
comments from many different sources filers, preparers analysts.
Important point is that this standard will replace the all the industry specific
standards in US GAAP ie SOP 97-2, EITF 0801. This standard will be relevant
for all contracts.
Industries probably most effected will be technology, high tech software, also
the telcos.
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Step 1 – Revenue Accounting can combine items from different operational contracts
from different operational applications in one Revenue Accounting contract.
The contract is the level for determination and allocation of the transaction price.
Step 2 - The Performance Obligation (POB) is the level, where the Stand-alone Selling
Price (SSP) is defined, where the price is allocated and the fulfillment (PoC)
determined.
Usually it corresponds to an item of an operational contract. But it can also be a
combination of several items, e.g. from a sales BoM (bill of material),
or an implicit obligation, e.g. customer’s right for software upgrade.
Step 3 – The transaction price is determined from pricing conditions of the operational
items. It cannot be maintained within Revenue Accounting.
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SD Revenue Recognition allows:
For Sales from stock:
Recognize revenue based on defined events
For service contracts:
Recognize revenue spread straight line over duration of billing plan
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SD offers an integrated Revenue Recognition based on SD documents.
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Operational contracts can be combined:
By rules in a custom specific Badi implementation
Manually within Revenue Accounting
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If a customer can benefit from the separate lower level items of a sales BoM on
their own, then every item corresponds to a separate “distinct” POB.
If a customer can not benefit from the separate lower level items of a sales
BoM on their own, then the BoM as a whole corresponds to one POB.
(Indicator, whether a customer can benefit from the separate items on their
own, can be, whether they are usually also sold on their own.)
If the lower level items correspond to distinct POBs, then any events on the
higher level items are broken down to the separate POBs.
If the BoM as a whole corresponds to one POB, but the lower level items of the
BoM are relevant for delivery or billing, then special non-distinct POBs are also
created in the RA contract. Events on the lower level items are then aggregated
on the higher level “compound” POB.
Revenue Accounting can create separate “linked” POBs for implicit obligations
that are not included as explicit item in the operational contract. These POBs
always have to be linked to a “leading” POB that corresponds to some
operational item.
Examples: rights for software upgrades or maintenance without explicit charge.
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From SD orders, all pricing conditions are transferred to Revenue Accounting
and summed up to the transaction price.
The transaction price can only be maintained via conditions in the operational
contract (or invoice).
After complete delivery and final invoice, the transaction price must be equal to
the total invoiced amount in the operational application.
The SSPs for allocation can be delivered by a special condition from the
operational application, or they can be maintained (or uploaded) in BRFplus in
Revenue Accounting.
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A POB can have fulfillment-type event-based or time-based.
For event-based, possible event-types are:
Goods issue
Invoice
Manual fulfillment (manual input of PoC)
In future further types of event shall be supported, e.g. proof of delivery.
For time-based fulfillment, start date and duration or end date cna be
transferred from the operational item or maintained manually in Reveneu
Accounting.
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Revenue Accounting is decoupled from operational sales applications.
It is an Add-on to ERP Financials
Data from different operational applications can be transferred into Revenue
Accounting.
BRFplus is a flexible rules framework that is used to define rules for the
transformation of operational items into contracts and performance obligations.
In the end, Revenue Accounting creates postings to FI-GL and CO-PA
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In operational applications, an Integration Component (IC) creates Revenue
Accounting Items (RAI) and sends them to Revenue Accounting.
A Revenue Accounting Item contains all data from operational items and events
that are relevant for revenue accounting.
The structure of Revenue Accounting Items can be configured in Revenue
Accounting separately for different operational applications.
The Adapter Re-use Layer (ARL) of Revenue Accounting receives RAIs and
transforms them into RA contracts and Performance Obligations.
Rules for transformation can be defined in Business Rules Framework plus
(BRFplus).
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A RAI is a subset of an item in an operational system.
It must contain all the data which is relevant for revenue accounting.
Each sender component defines this subset on its own (configuration of a RAI-class).
The subset (RAI) can be configured in a framework (copy from BIT-management).
Based on this subset definition the framework allows the generation of a persistence
for the RAIs as well as an RFC-enabled function module for RAI-creation (+ access
methods, structures, indexes, …).
Currently we allow the configuration and processing of order items, invoice items and
fulfillment items.
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Customers can configure rules for the different steps of transformation from
Revenue Accounting Items -> RA contract and POBs:
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Adapter Re-use Layer passes RA contracts with performance obligations,
invoice event data and fulfillment event data of the Revenue Accounting
Engine.
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