Revenue Recognition SAP

SAP R/3 SD REVENUE RECOGNITION - BEST PRACTICE

Knowledge Document

Version 1.4

SAP AG File: RR_Best_Practice_Knowledge_Document_V1.doc Page: 2

SAP R /3 SD REVENUE RECOGNIT ION -

BEST PRACTICE

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K N O W L E D G E D O C U M E N T (Based on R/3 Release 4.7)

Release: Version 1.4 from of July 2005

Issued by: SAP AG Neurottstraße 16 69190 Walldorf

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Revenue Recognition - Best Practice Table of Contents Knowledge Document


1 GENERAL RECOMMENDATIONS .........................................................................6

2 DESCRIPTION OF BUSINESS AREA.....................................................................8

2.1 The available methods include:............................................................................................................... 8

2.2 The trigger and impact of the methods are: .......................................................................................... 8

2.3 Typical Core Business Processes using the methods are: ..................................................................... 8

2.4 Business Process Specific Information ................................................................................................... 9

3 IMPLEMENTING REVENUE RECOGNITION .......................................................10

3.1 Getting started R/3 SD Revenue Recognition...................................................................................... 10 Required releases and support packages........................................................................................................... 10

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Supported processes in revenue recognition...................................................................................................... 10 Starting with customizing.................................................................................................................................. 12

3.1.1.1 Global informations ................................................................................................................... 12 3.1.1.2 Presteps...................................................................................................................................... 12

Customizing FI accounts and their settings ....................................................................................................... 14 3.1.1.3 Unbilled receivable account and deferred revenue account....................................................... 14 3.1.1.4 Revenue account........................................................................................................................ 18

SD-Customizing ................................................................................................................................................ 20 3.1.1.5 SD item-categories and their settings ........................................................................................ 20 3.1.1.6 Customizing revenue recognition type on item category level .................................................. 22 3.1.1.7 Customizing revenue recognition accrual start date .................................................................. 24 3.1.1.8 Account determination............................................................................................................... 25

4 DESCRIPTION OF CORE BUSINESS PROCESSES ...........................................27

4.1 Standard Revenue Recognition at time of billing................................................................................ 27 General Information .......................................................................................................................................... 27 Business steps overview and process description.............................................................................................. 28 Critical functions ............................................................................................................................................... 28 Variations of the process ................................................................................................................................... 28 Additional important information...................................................................................................................... 28

4.2 Time based revenue recognition (‘A’) .................................................................................................. 29 General Information .......................................................................................................................................... 29 Business steps overview and process description.............................................................................................. 29

4.2.1.1 Process 2 – time based with VF44 as first ................................................................................. 29 4.2.1.2 Process 3 – time based with invoice as first .............................................................................. 30

Critical functions ............................................................................................................................................... 31 Variations of the process ................................................................................................................................... 31 Additional important information...................................................................................................................... 31

4.3 Service based revenue recognition (‘B’)............................................................................................... 33 General Information .......................................................................................................................................... 33 Business steps overview and process description.............................................................................................. 33

4.3.1.1 Process 4 – service based with VF44 as first ............................................................................. 33 4.3.1.2 Process 5 – service based with invoice as first .......................................................................... 34


4.4 Service based revenue recognition (‘B’) contract with call off........................................................... 37

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General Information .......................................................................................................................................... 37 Business steps overview and process description.............................................................................................. 37

4.4.1.1 Process 6 – service based with VF44 as first ............................................................................. 37 4.4.1.2 Process 7 – service based with invoice as first .......................................................................... 38


4.5 Time based and billing related revenue recognition (‘D’) .................................................................. 41 General Information .......................................................................................................................................... 41 Business steps overview and process description.............................................................................................. 41 Critical functions ............................................................................................................................................... 42 Variations of the process ................................................................................................................................... 42 Additional important information...................................................................................................................... 42

4.6 Time based revenue recognition in credit/debit memo processing with a credit/debit memo request (‘A’) 43

General Information .......................................................................................................................................... 43 Business steps overview and process description.............................................................................................. 43

4.6.1.1 Process 9 – time based with VF44 as first ................................................................................ 44

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4.6.1.2 Process 10 – time based with invoice as first............................................................................ 45 Critical functions ............................................................................................................................................... 46 Variations of the process ................................................................................................................................... 46 Additional important information...................................................................................................................... 46

4.7 Credit/debit memo revenue recognition with reference to preceding document (‘F’)..................... 47 General Information .......................................................................................................................................... 47 Business steps overview and process description.............................................................................................. 48 Critical functions ............................................................................................................................................... 49 Variations of the process ................................................................................................................................... 49 Additional important information...................................................................................................................... 49

4.8 Time based or service based revenue recognition recognition in credit/debit memo processing without a credit/debit memo request (‘A’ or ‘B’) .............................................................................................. 50

General Information .......................................................................................................................................... 50 Business steps overview and process description.............................................................................................. 51 Critical functions ............................................................................................................................................... 51 Variations of the process ................................................................................................................................... 51 Additional important information...................................................................................................................... 52

4.9 Service based revenue recognition in return processing with reference to an order (‘B’) .............. 53 General Information .......................................................................................................................................... 53 Business steps overview and process description.............................................................................................. 53

4.9.1.1 Process 13 – service based return processing with reference to an order with VF44 as first.... 54 4.9.1.2 Process 14 – service based return processing with reference to an order with invoice as first .. 55


4.10 Service based revenue recognition in return processing with reference to a contract and call off order (‘B’) ............................................................................................................................................................. 57

General Information .......................................................................................................................................... 57 Business steps overview and process description.............................................................................................. 57 Critical functions ............................................................................................................................................... 58 Variations of the process ................................................................................................................................... 58 Additional important information...................................................................................................................... 59

5 PROCESSES CURRENTLY NOT SUPPORTED ..................................................60

6 MONITORING OF THE REVENUE RECOGNITION DATA...................................61

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6.1 Monitoring aspects................................................................................................................................. 61

6.2 FI-Monitoring......................................................................................................................................... 62 Check Account Balances ................................................................................................................................... 62 Reconcile FI and SD Values.............................................................................................................................. 64 Automatic Clearing of Accrual Accounts.......................................................................................................... 65

6.3 SD-Monitoring with VF45..................................................................................................................... 67 VF45 Overview ................................................................................................................................................. 67 Selection criterias of VF45................................................................................................................................ 68

6.4 SD-Monitoring with VF47..................................................................................................................... 70 VF47 Overview ................................................................................................................................................. 70 VF47 selection criteria ...................................................................................................................................... 70 VF47 Error categories ....................................................................................................................................... 75

6.4.1.1 Account determination errors: ................................................................................................... 75 6.4.1.2 Inconsistencies between VBREVK / VBREVE/ VBREVR ...................................................... 75 6.4.1.3 Incorrect values / balances......................................................................................................... 75 6.4.1.4 status problem............................................................................................................................ 75 6.4.1.5 Currency problem ...................................................................................................................... 76

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6.4.1.6 Lock problem............................................................................................................................. 76 6.4.1.7 Assignment problem.................................................................................................................. 76

6.5 SD Monitoring with VF48 ..................................................................................................................... 78 VF48 Overview ................................................................................................................................................. 78 VF48 selection parameter.................................................................................................................................. 78 Results of VF48................................................................................................................................................. 78

6.5.1.1 Upper part of the screen - Balances ........................................................................................... 80 6.5.1.2 Lower part of the screen - VBREVx rows (SD tables).............................................................. 81 6.5.1.3 Additional function.................................................................................................................... 82

7 FUNCTIONAL ENHANCEMENTS.........................................................................83

8 RESTRICTIONS FROM SD SIDE..........................................................................85

8.1 General restrictions ............................................................................................................................... 85

8.2 Account restrictions ............................................................................................................................... 85

8.3 Cost restrictions ..................................................................................................................................... 85

8.4 Adjustment restrictions ......................................................................................................................... 86

8.5 Restrictions for specific processes......................................................................................................... 88

9 OTHER RESTRICTIONS .......................................................................................89

9.1 REVREC and NON-REVREC Postings .............................................................................................. 89

9.2 Translation of foreign currencies ......................................................................................................... 89

10 IMPORTANT TO DO´S.......................................................................................90

11 IMPORTANT NOTES .........................................................................................91

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Revenue Recognition - Best Practice 1 General recommendations Knowledge Document


1 General recommendations

In order to comply with the latest bookkeeping principles and current regulations, like Generally Accepted Accounting Principles (US-GAAP), International Accounting Standards (IAS) / Financial Reporting Standards (FRS), as well as the Sarbanes-Oxley Act, SAP provides some general recommendations and best practices for customers using SAP R/3 revenue recognition in the Sales and Distribution component (SD). In the whole document revenue recognition is set for SAP R/3 SD revenue recognition.

If customers want to use the revenue recognition functionality in their productive environment, the implementation must be subject to a pre go-live assessment to avoid a negative impact on the financial statement. This assessment is completely free of charge. In other words, the customer will have to ask explicit permission from SAP in order to use this functionality (detail information provided by note 768561 and 779366).

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As revenue recognition provides a data stream into the financial system, the setup of the function is not only an SD task. FI consultants with experience in the area of Balance Sheet and P&L customizing have to setup the account assignment using SAP Best Practices and need to review the processes that are customized in the SD area.

Furthermore, the entire revenue recognition process should be approved by the responsible Head of Accounting and, if necessary, reviewed by the external auditor of the company.

Revenue recognition needs to be implemented by SAP-certified SD- and FI-Consultants.

To make sure that compliance with the latest requirements is possible, always implement the latest versions of the SD module, especially the latest notes on revenue recognition.

Also, SAP always recommends the application of the latest support package. Because of the nature of the revenue recognition function, it is necessary to

monitor continuously (at a minimum monthly) the results by using the transaction VF45 and VF48, which delivers a process view of SD and FI and also by using transaction VF47, which provides a more technical view.

To implement revenue recognition in already existing processes (transfers of old data) a detailed concept creation is necessary. For this request SAP offers consulting, which is chargeable.

Program modifications in a revenue recognition relevant process are discouraged because they may have unexpected effects and may result in an incorrect data stream for FI. Any modifications made must be very closely monitored to prevent any negative impacts to the revenue recognition process. Additionally modifications have to be reviewed whether they are still in line with legal finance guidelines and regulations.

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Revenue Recognition - Best Practice 1 General recommendations Knowledge Document


If the revenue recognition functionality is activated once in the productive system landscape, a deactivation has to be declined due to the direct impact to the accounting and the danger of data inconsistencies.

Always get the latest version of the Revenue Recognition Best Practices Guide. The link can be found in note 779365.

As IS-media solution is used, there is a Revenue Recognition Best Practices Guide available for this industry solution.

The comments in these documents are binding for all customers using the SAP R/3 revenue recognition functionality and the outlined recommendations have to be implemented.

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Revenue Recognition - Best Practice 2 Description of Business Area Knowledge Document


2 Description of Business Area

Many companies require that revenues are posted according to a time period. This means for example, that the revenues must be realized in the posting period, in which the service was carried out, and not in the posting period, in which the billing document was set up. The revenue recognition function in the SAP R/3 system helps you to fulfil these requirements and separates the revenue recognition process from the billing process. The R/3 system offers a flexible solution to companies using various methods of revenue recognition.

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2.1 The available methods include:

Revenue recognition at the point of billing (standard method) Time-related revenue recognition (the revenues are realized between specific set

dates in equal proportions) Service-related revenue recognition (the revenues are realized on the basis of a

specific event, e.g. the goods issue for a delivery) Credit/Debit memo request with reference to preceding document Service based revenue recognition, billing related (only for IS-M solution)

2.2 The trigger and impact of the methods are:

Revenue recognition is set up and initialized by the Sales and Distribution (SD) processes and therefore the revenue recognition method is assigned to the item category in the customizing of the SD module.

Revenue recognition impacts the Financial Accounting by the account postings and therefore two additional accounts (balance sheet accounts) have to be created in the FI module. The accounts are: deferred revenue account and unbilled receivable account. Detailed information are provided by note 777996.

2.3 Typical Core Business Processes using the methods are:

Time based revenue recognition e.g. for rental contracts valid for a long time with a periodic billing plan.

Service based revenue recognition e.g. a service contract with a related call off order, where services are included and a partial billing plan is assigned.

Service based revenue recognition e.g. a sales order is delivered in a totally another time period than the invoice is created and released.

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Revenue Recognition - Best Practice 2 Description of Business Area Knowledge Document


Time based and billing related revenue recognition e.g. the invoicing has to be done before revenues may be realized.

This document mainly deals with the non-standard revenue recognition since only for these the special revenue recognition functionality is relevant. Further in this document the term ‘revenue recognition’ refers to the use of a revenue recognition method other than the standard revenue recognition.

2.4 Business Process Specific Information

The revenue recognition process is included in standard SD processes and is used in most cases with the billing plan functionality.

Revenues aren’t posted to the G/L account when releasing the invoice to accounting.

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ed. With the revenue recognition run (VF44) FI documents are created and the

revenues will be realized. This is possible after the process is initialized (depending on the revenue recognition method).

For a background run of VF44 report ZZVF44HN (note 377318) is available. (valid for < 46C HP 49 and 470 < HP 23)

With the cancellation of the revenue recognition (VF46) the revenue recognition posting can be reversed, e.g. if revenues have been realized in error. The revenue recognition cancellation is not a real cancellation in the sense of a reverse posting. The balances on the accounts at the creation date of the cancellation are used as a basis.

A function of revenue recognition is the grouping and monitoring of revenues in two additional general ledger accounts, which are:

o unbilled receivables account (U/R account) o deferred revenues account (D/R account)

You can see in these accounts whether revenue has been realized, but not yet taken into account in the invoice, or have been taken into account in the invoice, but not yet realized.

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Revenue Recognition - Best Practice 3 Implementing Revenue Recognition Knowledge Document


3 Implementing Revenue Recognition

3.1 Getting started R/3 SD Revenue Recognition

Required releases and support packages

When you want to start with revenue recognition, the very first step to do is, look at your system-status!

Don’t start implementing or customizing revenue recognition, when you don’t have the latest support package for your SAP-release.

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Recommended releases and support packages are (as for May 2005): 46C SP49, additional notes from note 813850

470 SP23, additional notes from note 813850

Supported processes in revenue recognition

Before starting with the implementation of revenue recognition functionality, it is essential to know, which processes are supported by SAP-functionality. The supported processes and functions are described in the document “Best Practice for Revenue Recognition”. This document contains detailed information about:

Necessary Customizing settings Supported processes and scenarios Limitations and restrictions placed on the solutions offered Recommendations for monitoring the revenue recognition process A guide for implementation

You will find a link to the latest version of this document in SAP-note 779365. Also look at the “prerequisits for revenue recognition” mentioned in SAP-note 782758.

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In order to comply with the latest accounting principles and current financial regulations, like 'Generally Accepted Accounting Principles' (US-GAAP), 'International Accounting Standards' (IAS) / 'Financial Reporting Standards' (FRS), as well as the 'Sarbanes-Oxley Act', SAP provides some general recommendations for customers using Revenue Recognition in the Sales and Distribution component (SD). Some information from this note:

the setup of the function is not only an SD task, but also a FI task Revenue Recognition needs to be implemented by SAP-certified SD-and

FI consultants. Program modifications in a revenue recognition relevant process are

discouraged because they may have unexpected effects and may result in an incorrect data stream for FI.

It is necessary to monitor the Revenue Recognition function monthly, at a minimum, the results by using the transactions VF47 which provides a more technical view as VF45 which delivers a transaction view of SD and FI.

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Starting with customizing

3.1.1.1 Global informations

When you try to start customizing revenue recognition, you will find, that customizing item for revenue recognition cannot be entered or changed. According to SAP-note 820417 the path on IMG Sales and Distribution -> Basic Functions -> Account Assignment/Costing -> Revenue Recognition -> Set Revenue Recognition For Item Categories is not open for any entering or changing of customizing data. Usage of R/3 SD Revenue Recognition functionality is under a special activation by SAP (see also SAP-notes 779366 and 605665). By releasing the SD Revenue Recognition function separately, we want to ensure that customers who intend to use this function are aware of and agree to the necessary determining factors and prerequisites.

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Despite this special release process, customers are still responsible for setting up, using and operating the R/3 SD Revenue Recognition function. 3.1.1.2 Presteps

For the setup of revenue recognition processes you have to customize 1) FI accounts and their settings 2) SD item-categories and their settings 3) revenue recognition type on item category level 4) account determination

The following accounts are needed for the representation of the revenue re-cognition process:

Revenue account (recognized revenues) Receivables account (customer account) Revenues to be deferred (deferred revenue account or D/R account) Unbilled receivables (unbilled receivables account or U/R account)

For the revenue account and receivables account you can use the accounts that you used before in the other standard processes. The account of the revenues to be deferred (in the following called D/R account) and the account of the unbilled receivables (in the following called U/R account) have to be created as new accounts.

The U/R account must be different from the D/R account, i.e. different account numbers must be used. Only this way the posting process of the revenue recognition can be monitored.

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An account number is never a revenue account that is used for the accruals accounts (U/R and D/R account).

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SAP AG File: RR_Best_Practice_Knowledge_Document_V1.doc Page: 14 Of: 91

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Customizing FI accounts and their settings

3.1.1.3 Unbilled receivable account and deferred revenue account

For the unbilled receivable account and for the deferred revenue account the following settings in FI must be maintained: Transaction : FS00 Path: Financial Accounting -> General Ledger Accounting -> G/L

Accounts -> Master Records -> G/L Account Creation and Processing -> Edit G/L Account (Individual Processing) -> Edit G/L Account Centrally

On Tab “Type/Description” field “Balance sheet account” (SKA1-XBILK) must be set to YES. This indicates that the G/L account is managed as a balance sheet account. Unbilled receivable and deferred revenue account have to be balance sheet accounts, because only these accounts and their balances are carried forward at fiscal year-end.



On Tab “Control data” the following fields have to be fill out:

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Field “Only balances in local currency” (SKB1-XSALH) to no *1) Field “Tax category” (SKB1-MWSKZ) with + (Only output tax allowed) or * (All tax types allowed) *2) Field “Posting without tax allowed” (SKB1-XMVNO) to yes *3) Field “Open item management” (SKB1-XOPVM) to yes *4) Field “Line item display” (SKB1-XKRES) to yes *5)



*1) With “no” it Indicates that balances are updated not only in local currency when users post items to this account. So the revenue recognition processes are able to post in different currencies.

*2) Possible entries:

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Here just “+” or “*” are used.

*3) With “yes” it indicates that the account can still be posted, even if a tax code has not been entered. In revenue recognition it should be possible to post both, taxable and non-taxable items, to an account. For example, you would usually set up a separate tax code for the non-taxable transactions. When taxes are entered using jurisdiction codes, however, this separate tax code cannot be used since jurisdiction codes cannot be specified for foreign customers. In this case, you allow users to post items without tax codes in the corresponding expense and revenue accounts.

*4) With “yes” it determines that open items are managed for this account. Items posted to accounts managed on an open item basis are marked as open or cleared. The balance of these accounts is always equal to the balance of the open items. Set up accounts with open item management if offsetting entries are to be assigned to the postings made to these accounts. Postings to these accounts represent incomplete processes or process-steps.

Be careful when using open item management, because in this case you cannot use document summarization!

Userexit xxxxxxxxx must be used to set the assignment in the SD invoices. *5) With “yes” here it indicates that line item display is possible in this account. For

line item display, the system stores an entry per line item in an index table which contains the link between line item and account.

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On Tab “Create/bank/interest” there is one entry necessary:

Field “Post automatically” (SKB1-INTB) with yes This mark indicates that this account can only be posted to by the system using account determination tables. No manual posting is allowed, because manual posting will never change the revenue recognition tables.



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3.1.1.4 Revenue account

For the revenue account the following settings must be maintained:

On Tab “Type/description”

Set field “P&L statement acct” (SKA1-XPLACCT) to yes. For revenue accounts you need accounts with type P&L.



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On Tab “Control data” maintain the following fields:

Field “Posting without tax allowed” (SKB1-XMVNO) to yes Do not select field “Only balances in local crcy” (SKB1-XSALH). Always NO



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SD-Customizing

3.1.1.5 SD item-categories and their settings

Normally when you are working with revenue recognition, you are working with SD contracts or customer orders, deliveries and invoices. So you have to customize these documents. On sales document header level you have to do just the normal customizing for the sales document types. No additional customizing is necessary for revenue recognition. On sales item level, you have to do some customizing, when using revenue recognition. When you want to use a billing plan, you have to customize this in your item categories. Path: Sales and Distribution -> Sales -> Sales Documents -> Sales Document Item -> Define Item Categories



Field “relev. for billing”:

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Use “I” for the document item category you want to use with a billing plan. Field “billing plan type”:

For a billing plan type, choose one of the above types or create your own billing plan type and the use this one for the item categories. You can create your own billing plan type in customizing via path Sales and Distribution -> Billing -> Billing Plan -> Define



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Billing Plan Types or transaction OVBI for periodic billing or transaction OVBO for milestone billing. 3.1.1.6 Customizing revenue recognition type on item category level

You will find this part of customizing via the following path: Sales and Distribution -> Basic Functions -> Account assignment / Costing -> Revenue Recognition Or via transaction: OVEP. Set Revenue Recognition For Item Categories

Possible entries for the field “Rev. recognition” are:

How to use this revenue recognition category? Referring to chapter 3 in this document, where the processes are described, the usage of this category is explained.



Here a short summary: Category blank ‘ ‘: see chapter 4.1 used with standard revenue recognition

at time of billing Category ‘A’: see chapter 4.2 used with timebased revenue

recognition see chapter 4.6 used with credit/debit memo timebased

revenue recognition with memo request see chapter 4.8 used with credit/debit memo timebased

revenue recognition without memo request Category ‘B’: see chapter 4.3 used with servicebased revenue

recognition see chapter 4.4 used with servicebased revenue

recognition in contracts with calloffs

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ed. see chapter 4.8 used with credit/debit memo timebased

revenue recognition without memo request see chapter 4.9 used with servicebased revenue

recognition in return process with reference to an order see chapter 4.10 used with servicebased revenue

recognition in return process with reference to a contract and calloff-order

Category ‘D’: see chapter 4.5 used with timebased and billing related revenue recognition

Category ‘E’: is relevant for customers who use the ‘Industry Solution Media’. Details are described in the ‘Best Practice IS-M’

Category ‘F’: see chapter 4.7 used with credit/debit memo revenue recognition with reference to a preceding document

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3.1.1.7 Customizing revenue recognition accrual start date

Selects the start date for the accrual period and is relevant for the revenue recognition type A. The accrual start date determines the start of the period in which revenues should be recognized.

v

You have the following options:

Proposal based on contract start date

Revenue recognition proposes the start date of the sales contract for the item as the accrual start date.

Proposal based on billing plan start date Revenue recognition proposes one of the following dates as the accrual start date:

• In a milestone billing plan, the billing date of the first milestone

• In a periodic billing plan, the earlier of the following dates: Billing plan start date Start date of first settlement period



3.1.1.8 Account determination

Next customizing step is the account determination. You will find this item via path Sales and Distribution -> Basic Functions -> Account Assignment/Costing -> Revenue Recognition -> Maintain Account Determination or transaction VKOA.

In the SD module, both the revenue account and the account for deferred revenue amounts must be maintained in the revenue account determination. This occurs in customizing transaction according the following example:

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Assign G/L accounts for revenues and deferred revenues:

G/L account no. (SAKN1) revenue account Provision acc. (SAKN2) D/R account

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Assign account for unbilled receivables: In customizing transaction OVUR, the account for unbilled receivables (U/R account) is maintained depending on the reconciliation account and the associated chart of accounts. There are two possibilities for the determination of the reconciliation account:

1) The reconciliation account is taken from the customer master record of the payer. 2) For the billing type assigned to the sales document, the system checks

whether the reconciliation account determination is active. If this is the case, the system performs a reconciliation account determination within the revenue recognition and uses the so determined reconciliation account. (note : 644296)

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Maintain NonBldRec. U/R account

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Revenue Recognition - Best Practice 4 Knowledge Document

Description of Core Business Processes


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4 Description of Core Business Processes

The illustration of typical core business processes show an overview of the suggestive process flow based on the selected revenue recognition method. Within the process flow the separate steps can be done in reverse order, especially the chronological order of the creation/releasing of the invoice and the posting of the revenues is variable. For each core business processes using a chosen revenue recognition method two processes are described to display the different account postings depending on the sequence. There is no relation to values done and there is no partial delivery, partial invoicing of partial revenue recognition included. The description is simplified and the process flow productive landscapes are much more complex.

4.1 Standard Revenue Recognition at time of billing

General Information

Process 1 is the R/3 standard method for revenue recognition consisting of revenue recognition at the time of billing.

Companies use standard revenue recognition, if they want to post revenues in Financial Accounting, as soon as an invoice is released to accounting.

No special revenue recognition functionality is used. Revenue recognition method = ‘ ‘ (blank).




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Business steps overview and process description

Will not be discussed further as this process is the standard billing process with the standard revenue recognition at the time of billing.

Critical functions

Nothing.

Variations of the process

Nothing.

Additional important information

Nothing.




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4.2 Time based revenue recognition (‘A’)

General Information

Using time-related revenue recognition, it is possible to carry out recognition over a specific period of time. An example of this is revenue recognition for the length of a service or rental contract. The proportions for the periods are equal.

Time-related revenue recognition can be used for single billing document items without billing plan functionality, with periodic billing plans and with milestone billing plans.

Revenue recognition method = ‘A’. Process 2 characterizes that transaction VF44 is used before invoice.

Process 3 demonstrates the process when the invoice is posted before transaction VF44.


4.2.1.1 Process 2 – time based with VF44 as first

As a first step in the process the sales contract is created, which can contain a billing plan. This sales document contains the line items, which have to be billed as well as




the relevant conditions. The saving of this document triggers the creation of control lines (VBREVK) and the revenue lines (VBREVE) for each period. With time-related revenue recognition the recognition is carried out between a specific start and end date in equal parts. The start and end dates are determined on item level in the sales document. Here the billing plan dates or the contract data dates will be used. The number of periods between these dates is determined using the financial calendar for the company code assigned to the document. According to the number of periods and the amount to be billed, the revenue lines are calculated. Since the revenue recognition is now initialized, it is possible to realize the revenue using transaction VF44. This triggers the update of the control lines with the realized value and the new balance and the update of the revenue lines. In FI an accounting document is automatically created, which posts on the reconciliation account ‘unbilled revenues’ and on the revenue account.

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When the invoice is created and released for accounting, another accounting document is created, which balances (or reduces) the reconciliation account and posts on the receivables account. The revenue recognition tables are also updated by this step. A new reference line is created, containing information of the invoice, and the control lines are updated as well. If only a partial billing took place or was realized, the steps following the order creation may be repeated for further periods until the sales document is completed. In such cases another revenue account (deferred account) can be posted. 4.2.1.2 Process 3 – time based with invoice as first




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As a first step in the process the sales contract is created, which can contain a billing plan. This sales document contains the line items, which have to be billed as well as the relevant conditions. The saving of this document triggers the creation of control lines (VBREVK) and the revenue lines (VBREVE) for each period. With time-related revenue recognition the recognition is carried out between a specific start and end date in equal parts. The start and end dates are determined on item level in the sales document. Here the billing plan dates or the contract data dates will be used. The number of periods between these dates is determined using the financial calendar for the company code assigned to the document. According to the number of periods and the amount to be billed, the revenue lines are calculated. When the invoice is first created and released to accounting, an accounting document is created. It posts to a different reconciliation account called ‘deferred revenues’ and to the receivables account. This event also triggers the update of the control lines with the realized value and the new balance and creates the reference lines. Now transaction VF44 runs. This triggers the update of the control lines and the update of the revenue lines. Also in FI, an accounting document is automatically created, which posts on the reconciliation account ‘deferred revenues’ and on the revenue account. If only a partial billing took place or was realized, the steps following the order creation may be repeated for further periods until the sales document is completed. In such cases another revenue account (unbilled receivable account) can be posted.

Critical functions

A contract will be used without contract data and without billing plan. As a consequence no VBREVE can be created, as there is no start and no end date.

A condition is added manually in the invoice, not in the contract/order, and the new condition is using separate accounts. As a consequence the posted values from VF44 would differ from the values posted by the billing document. The invoice cannot be released to accounting, the error message F5 702 would appear. Note 496721 explain the solution: the added condition has to be classified in a way that it is not relevant for revenue recognition.

Instead of a contract, a sales order can be used as sales document in this process, which then replaces the contract. In this case a billing plan has to be used, if the sales order contains no contract data. This triggers the same follow on steps.

Additional steps of the process can include the delivery of items and posting goods issue which do not affect the revenue recognition process.


Nothing.


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4.3 Service based revenue recognition (‘B’)

General Information

Using service-related revenue recognition, you can carry out recognition on the basis of a specific event. An example of this is revenue recognition for a service contract, where services are included.

Revenue recognition method = ‘B’. Process 4 demonstrates the process, when transaction VF44 is run before

invoicing. Process 5 demonstrates the process, when the invoice is posted before transaction VF44.


4.3.1.1 Process 4 – service based with VF44 as first




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As a first step in the process the sales order or sales contract is created. This sales document contains the line items, which have to be billed as well as the relevant conditions. The saving of this document triggers the creation of the control lines (VBREVK) only. No revenue lines are created at this stage. The next process step consists of the creation of the delivery with reference to the order/contract, the line items are copied into this document. The goods are picked either with lean warehouse management or with full warehouse management including transfer orders. When the goods have left the company stock, goods issue is posted. This triggers the creation of the revenue lines (VBREVE) in service based revenue recognition according to the document data. It is now possible to realize the revenue using transaction VF44. This triggers the update of the control lines with the realized value, a new balance, and the update of the revenue lines. In FI an accounting document is automatically created which posts to the reconciliation account ‘unbilled receivables’ and to the revenue account. When the invoice is created and released to accounting, another accounting document is created which balances (or reduces) the reconciliation account and posts to the receivables account. The revenue recognition tables are also updated by this step. A new reference line is created containing information from the invoice, the control lines will also be updated. 4.3.1.2 Process 5 – service based with invoice as first

As a first step in the process the sales order or sales contract is created. This sales document contains the line items, which have to be billed, as well as the relevant




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conditions. The saving of this document triggers the creation of the control lines (VBREVK) only. No revenue lines are created at this stage. The next process step consists of the creation of the delivery with reference to the order/contract, the line items are copied into this document. The goods are picked either with lean warehouse management or with full warehouse management including transfer orders. When the goods have left the company stock, goods issue is posted. This triggers the creation of the revenue lines (VBREVE) in service based revenue recognition according to the document data. Now the invoice is created and released to accounting. An accounting document is created, which posts to the reconciliation account ‘deferred revenue’ and to the receivables account. The revenue recognition tables are updated by this step. A new reference line is created containing information from the invoice, the control lines will also be updated. After this step transaction VF44 is used. This triggers the update of the control lines and the update of the revenue lines. In FI an accounting document is automatically created, which posts to the reconciliation account ‘deferred revenue’ and to the revenue account.

Critical functions

If the order item is relevant for ‘delivery-related-invoicing’ (FKREL = A) and there is a under/over delivery (there is more ordered than delivered/ there is more delivered than ordered) the value, which is delivered and invoiced, has to be considered as revenues. It is necessary to adjust the quantity of the order according to the delivery quantity.

If the order item is relevant for ‘order-related-invoicing’ (FKREL = B or I) and there is a under/over delivery (there is more invoiced than delivered/ there is more delivered than invoiced) the value, which is ordered and invoiced, has to be considered as revenues. It is necessary to adjust the revenues and to complete the order process. This is done by the system as soon as a reason for rejection is set.

If there are changes of condition values or time data in the sales order, an adjustment is necessary for the revenues. The revenue lines have to be updated. The adjustment is only done, if there wasn’t an invoice created and if there was a complete delivery (vbup-lfsta = C). The adjustments in case of under/over delivery, price or time changes as described in order processing, are not possible for contracts using performance based revenue recognition. The adjustment process for contracts is not supported for < 46C HP 48 and 470 < HP 22)


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4.4 Service based revenue recognition (‘B’) contract with call off

General Information

Using service-related revenue recognition you can carry out recognition on the basis of a specific event. An example of this is revenue recognition for a contract with a call off order while the contract item is invoiced and the linked call off order item is delivered.

Revenue recognition method = ‘B’ for the contract and call off order. Process 6 demonstrates the process, when transaction VF44 is run before

invoicing. Process 7 demonstrates the process, when the invoice is posted before transaction VF44.


4.4.1.1 Process 6 – service based with VF44 as first

The first step in this process is the creation of the sales contract, which may contain a billing plan. This contract creation generates control lines in table VBREVK. In the




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second step a call off order is generated with reference to the contract and a delivery may have been created with reference to the call off order. The next process step is that the goods are picked either with lean warehouse management or with full warehouse management including transfer orders. When the goods have left the company stock, goods issue will be posted. This triggers the creation of the revenue lines (VBREVE). In the subsequent step, when transaction VF44 is run, an update of the control and revenue lines is generated. Additionally an accounting document is automatically created in FI, which posts to the unbilled account. After the invoice is created with reference to the contract and released to accounting, the reference lines will be created and the control lines will be updated. The created FI document posts to the unbilled account. 4.4.1.2 Process 7 – service based with invoice as first

The first step in this process is the creation of the sales contract, which may contain a billing plan. This contract creation generates control lines in table VBREVK. In a second step a call off order is generated with reference to the contract and a delivery may have been created with reference to the call off order. The next process step is that the goods are picked either with lean warehouse management or with full warehouse management including transfer orders. When the




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goods have left the company stock, goods issue is posted. This triggers the creation of the revenue lines (VBREVE). In the subsequent step an invoice is created and released to accounting, reference lines (VBREVR) will be created and control lines (VBREVK) will be updated. Additionally an accounting document is automatically created in FI, which posts to the deferred account. While transaction VF44 runs in the next step, an update of the control and revenue lines is generated. Additionally an accounting document is automatically created in FI, which posts to the deferred account.

Critical functions

If terms are added manually in the call-off order, there must be a link to a contract item otherwise the call-off order items are handled separately.

Changes of the revenue recognition accounts (D/R account / U/R account) are not supported.

If there is an over/under delivery of the call-off order items, the process should be completed. There is no clearing of the balance on the clearing account. The difference between billed and recognized value has to be posted by a credit memo. The creation of a credit memo in reference to a credit memo request doesn’t lead to the clearing of the balance and therefore the credit memo must be created in reference to the billing document.

In case of changes of condition values or time data in the contract / call-off order an adjustment for the revenue is only possible, if there is no invoice created. Before an invoice is created, the price and time changes have to be done correspondingly in the contract item and the related call-off order item.


In accordance with the above described process, where the invoice is related to the contract and the call off order is to be delivered, two other scenarios exist:

The call off order will be invoiced and delivered: When the call off order is created with reference to the contract, the saving of the call off order creates control lines (VBREVK). After the related delivery has posted the goods issue, revenue lines (VBREVE) are created. Important remark: The invoice has to be created in reference to the call off order (order-related invoicing) and NOT in reference to the delivery (delivery-related invoicing).

The contract will be invoiced and the call off order will not be delivered: While the contract is created, control lines are created in table VBREVK and during saving of the call off order revenue lines are generated in table VBREVE.




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In order to implement the three scenarios, the following customizing settings must be configured in the sales document types:

The contract will be invoiced and the call off order will be delivered: The billing relevance of the contract item category should be ‘B’ or ‘I’, while the billing relevance of the call off order item category should be ‘ ‘. The revenue recognition relevance of the contract and the call off order item categories should be set to ‘B’.

The call of order will be invoiced and delivered: The item category of the contract should be customized with revenue recognition relevance ‘ ‘, the item category of the call off order with ‘B’. The billing relevance of the contract item category should be ‘ ‘, while the billing relevance of the call off order item category should be ‘B’.

The contract will be invoiced and the call off order will not be delivered: The billing relevance of the contract item category should be ‘B’ or ‘I’, while the billing relevance of the call off order item category should be ‘ ‘. The revenue recognition relevance of the contract and the call off order item categories should be set to ‘B’.




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4.5 Time based and billing related revenue recognition (‘D’)

General Information

Using time based and billing related revenue recognition, you can carry out recognition on the basis of an invoice over a specific period of time. An example of this is revenue recognition for the length of a service or rental contract after the invoice is created and released. The proportions for the periods are equal.

Revenue recognition method = ‘D’. Process 8 will be initialized at the point in time when the billing document is

released to accounting. Afterwards transaction VF44 is run.


The contract or the sales order will be created. Then the invoice will be created. After the invoice was released to accounting all the Revenue Recognition tables are




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filled. The invoice posts to the deferred account and to the receivable account. The reference lines, the control lines and the revenue lines are now available for the Revenue Recognition Process. It is now possible to realize the revenue using transaction VF44. This triggers the update of the control lines with the realized value, the new balance and the update of the revenue lines. In FI, an accounting document is automatically created which posts to the reconciliation account ‘deferred revenues’ and on the revenue account.

Critical functions

Nothing.


Additional steps of the process can include the delivery of items and post goods issue, which do not affect the revenue recognition process.


The cancellation of the invoice using transaction VF11 is starting its own revenue recognition process. The releasing of the invoice cancellation document triggers the creation of separate control, revenue and reference lines. The revenue recognition cancellation process has no reference to the original revenue recognition process.




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4.6 Time based revenue recognition in credit/debit memo processing with a credit/debit memo request (‘A’)

General Information

Using time-related revenue recognition in a credit/debit memo processing, it is possible to carry out recognition over a specific period of time. An example of this is revenue recognition for the length of a credit/debit memo request. The proportions for the periods are equal. The credit/debit memo request is created in reference to a contract, order or invoice.

The credit/debit memo process with a credit/debit memo request sets up its own revenue recognition tables.

The credit memo process has the opposite posting logic to the billing. The debit memo process has the same posting logic to the billing, when posting to the reconciliation accounts.

When creating and transferring a credit memo to accounting, the system checks, whether a balance exists on the deferred revenue (D/R) account, otherwise the posting is made to the unbilled receivables (U/R) account.

Revenue recognition method = ‘A’. Process 9 demonstrates the credit memo processing, when transaction VF44 is

ran before creation of the credit memo. Process 10 demonstrates the credit memo processing, when the credit memo is posted before transaction VF44 is ran.





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4.6.1.1 Process 9 – time based with VF44 as first

As a first step in the process the credit/debit memo request is created, which may contain a billing plan. This sales document contains the line items, which have to be billed as well as the relevant conditions. The saving of this document triggers the creation of control lines (VBREVK) and the revenue lines (VBREVE) for each period. With time-related revenue recognition the recognition is carried out between a specific start and end date in equal parts. The start and end dates are determined on item level in the sales document. Here the billing plan dates or the contract data dates will be used. The number of periods between these dates is determined using the financial calendar for the company code assigned to the document. The revenue lines are calculated based on the number of periods and the amount to be billed. Since the revenue recognition is now initialized, it is possible to realize the revenue using transaction VF44. This triggers the update of the control lines with the realized value, the new balance and the update of the revenue lines. In case of the credit memo process, an accounting document is automatically created, which posts to the accruals account ‘deferred revenues’ and to the revenue account. In case of the debit memo process, an accounting document is automatically created, which posts to the accruals account ‘unbilled receivables’ and to the revenue account. When the invoice is created and released to accounting, another accounting document is created, which balances (or reduces) the accruals account and posts to the receivables account. The revenue recognition tables are also updated by this step. A




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new reference line is created, containing information from the invoice and the control lines are also updated. As a result, the opposite accruals accounts will be used for the credit memo process than are used for the debit memo process (invoices and debit memos have the same posting logic in accounting). 4.6.1.2 Process 10 – time based with invoice as first

As a first step in the process the credit/debit memo request is created, which can contain a billing plan. This sales document contains the line items, which have to be billed as well as the relevant conditions. The saving of this document triggers the creation of control lines (VBREVK) and the revenue lines (VBREVE) for each period. With time-related revenue recognition the recognition is carried out between a specific start and end date in equal parts. The start and end dates are determined on item level in the sales document. Here the billing plan dates or the contract data dates will be used. The number of periods between these dates is determined using the financial calendar for the company code assigned to the document. According to the number of periods and the amount to be billed, the revenue lines are calculated. When the invoice is created and released to accounting a different accruals account is posted together with the receivables account in the accounting documents. In case of the credit memo process the accruals account is called ‘unbilled receivables’ account.




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In case of the debit memo process the accruals account is called ‘deferred revenues’ account. Then transaction VF44 runs. This triggers the update of the control lines with the realized value and the new balance and updates the revenue lines as well. As a result the opposite accruals accounts will be used for the credit memo process than for the debit memo process (invoices and debit memos have the same posting logic in accounting).

Critical functions

Nothing.


The credit/debit memo processing with a credit/debit memo request can also be used as standalone process. It triggers the same steps as described previously.


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4.7 Credit/debit memo revenue recognition with reference to preceding document (‘F’)

General Information

Using credit/debit memo revenue recognition with reference to a preceding document, it is possible to carry out revenue recognition over a specific period of time equal to the original process. An example of this is revenue recognition for the length of a credit/debit memo request. The proportions for the periods are equal. The credit/debit memo request is created request in reference to a contract, order or invoice.

No new revenue recognition tables will be created. The credit/debit memo process updates the revenue recognition tables of the preceding sales process.

The revenue recognition method = ‘F’. It is implemented with note 447513 (SAPKH45B50, SAPKH46B38, SAPKH46C28).based revenue recognition type ‘A’ For preceding sales documents with type ‘B’ the note 839596 is relevant

Process 11 consider only type ‘A’ and will be initialized at the point in time, when the credit memo is released to accounting. Afterwards transaction VF44 is ran.




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The credit/debit memo process will be created with reference to a preceding sales document, and with revenue recognition type ‘F’ it updates the revenue recognition tables of the preceding sales process. When this type is set for the credit/debit memo request, the system checks whether the reference document is relevant for 'time-related revenue recognition' (method 'A'). In this case the subsequent credit/debit memo generates reference lines (VBREVR) corresponding to the reference document. The posting to the accounts depends on whether there is a balance on the D/R or the U/R account (revenue recognition run is done and/or invoice is released to accounting in the original process). It is now possible to realize the corrected revenue using transaction VF44. This triggers the update of the control lines and the update of the revenue lines. In FI an accounting document is automatically created which posts to the accruals account of either the D/R or U/R and to the revenue account.




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Critical functions


Nothing.


Valid for 46C < SP49 and 470 < SP22: For updating the revenue recognition tables (VBREVK and VBREVE) of the preceding sales process (after the credit/debit memo was created), it is necessary to do a manual update using VA02/VA42 or to run report ZZ_SALES_DOC_CHANGE from note 385149. This update will not be executed automatically. In detail: In the VBREVK the field ACC_VALUE and in VBREVE the field WRBTR have to be updated. If revenues have already been posted, the system must enable a correction posting (adjustment line). Valid for 46C > SP 49 and 470 > SP22: For the update you can use the VF42 and report SDRRAV54 (description see note 780993)




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4.8 Time based or service based revenue recognition recognition in credit/debit memo processing without a credit/debit memo request (‘A’ or ‘B’)

General Information

Using time-related revenue recognition in a credit/debit memo processing, it is possible to carry out recognition over a specific period of time equal to the original process. Using service-related revenue recognition in a credit/debit memo processing, it is possible to carry out recognition on the basis of a specific event equal to the original process. The credit/debit memo is created in reference to an invoice and there is no credit/debit memo request.

No new revenue recognition tables will be created. The credit/debit memo process updates the revenue recognition tables of the preceding sales process.

The revenue recognition relevance is transferred from the previous document. Revenue recognition method = ‘A’ or ’B’.

Process 12 will be initialized at the point in time when the credit memo is released to accounting. Afterwards transaction VF44 is ran.




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If a credit memo/debit memo is created and the reference document is the billing document, the credit memo/debit memo updates the revenue recognition tables of the preceding sales process. Therefore the posting to the accounts depends on whether there is a balance on the D/R or the U/R account (revenue recognition run is run and/or invoice is released to accounting).

Critical functions

Using revenue recognition method ‘B’ in a credit/debit memo created with reference to the preceding invoice in a contract process is not supported. This does not apply to order processes.





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When using Revenue recognition method = ‘D’, the credit memo/debit memo doesn’t update the existing revenue recognition tables of the preceding sales process. The credit memo/debit memo is starting its own revenue recognition process. The release of the credit memo/debit memo document triggers the creation of separate control, revenue and reference lines.


For updating the revenue recognition tables (VBREVK and VBREVE) of the preceding order process (after the credit/debit memo was created) it is necessary to do a manual update using va02/va42 OR to run report ZZ_SALES_DOC_CHANGE from note 385149. This update will not be executed automatically. In detail: In the VBREVK the field ACC_VALUE and in the VBREVE the field WRBTR have to be updated. If revenues have already been posted, the system must enable a correction posting (adjustment line).




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4.9 Service based revenue recognition in return processing with reference to an order (‘B’)

General Information

Using service-related revenue recognition in a return processing can carry out recognition on the basis of a specific event equal to the original process. The return order is created in reference to an order after the order was delivered. The return order is invoiced with a credit memo.

No new revenue recognition tables will be created. The return process updates the revenue recognition tables of the preceding sales process.

Revenue recognition method = ‘B’. Process 13 demonstrates the process when transaction VF44 is ran before

creation of the credit memo. Process 14 demonstrates the process when the credit memo is posted before transaction VF44 is run.





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4.9.1.1 Process 13 – service based return processing with reference to an order with VF44 as first

The return process will be created with reference to a preceding sales document and with revenue recognition type ‘B’. It updates the revenue recognition tables of the preceding sales process. As a first step the return sales order is created with reference to the sales order. This sales document contains the line items, which have to be credit as well as the relevant conditions. The saving of this document triggers not the update of the control lines (VBREVK). No revenue lines are created at this stage. The next process step consists of the creation of the delivery with reference to the return order; the line items are copied into this document. The goods receipt is posted. This triggers the creation of the revenue lines (VBREVE) in service based revenue recognition according to the document data. It is now possible to realize the revenue using transaction VF44. This triggers the update of the control lines with the realized value, a new balance, and the update of the revenue lines. In FI an accounting document is automatically created, which posts to the reconciliation account D/R or U/R and to the revenue account. The posting to the accounts depends on whether there is a balance on the D/R or the U/R account (revenue recognition run is done and/or invoice is released to accounting in the original process).




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When credit memo is created and released to accounting, another accounting document is created, which balances (or reduces) the reconciliation account and posts to the receivables account. The revenue recognition tables are also updated by this step. A new reference line is created containing information from the credit memo, the control lines will also be updated.

4.9.1.2 Process 14 – service based return processing with reference to an order with invoice as first

The return process will be created with reference to a preceding sales document and with revenue recognition type ‘B’. It updates the revenue recognition tables of the preceding sales process. As a first step the return sales order is created with reference to the sales order. This sales document contains the line items, which have to be credit as well as the relevant conditions. The saving of this document triggers not the update of the control lines (VBREVK). No revenue lines are created at this stage The next process step consists of the creation of the delivery with reference to the return order; the line items are copied into this document. The goods receipt is posted. This triggers the creation of the revenue lines (VBREVE) in service based revenue recognition according to the document data.




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In the subsequent step a credit memo is created with reference to the return sales order and released to accounting, reference lines (VBREVR) will be created and control lines (VBREVK) will be updated. Additionally, an accounting document is automatically created in FI, which posts to the D/R or U/R account Therefore the posting to the accounts depends on whether there is a balance on the D/R or the U/R account (revenue recognition is run and/or invoice is released to accounting). While transaction VF44 runs in the next step, an update of the control and revenue lines is generated. Additionally an accounting document is automatically created in FI.

Critical functions






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4.10 Service based revenue recognition in return processing with reference to a contract and call off order (‘B’)

General Information

Using service-related revenue recognition in a return processing with reference to a contract / call off order can carry out recognition on the basis of a specific event equal to the original process. In the original process the contract item is invoiced and the linked call off order item is delivered. The return order is created in reference to the call off order after the call off order was delivered. There won’t be a credit memo for the return process due to the call off order isn’t billing relevant.

No new revenue recognition tables will be created. The return process updates the revenue recognition tables of the preceding sales process.

Revenue recognition method = ‘B’. Process 15 will be initialized at the point in time when the goods issue posting is

done for the return order. Afterwards transaction VF44 is run.





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The return process will be created with reference to a preceding sales document and with revenue recognition type ‘B’. It updates the revenue recognition tables of the preceding sales process. As a first step the return sales order is created with reference to the call off order. This sales document contains the line items, which have not to be credit. In this process the sales contract is relevant for billing. The saving of this document triggers not the update of the control lines (VBREVK). No revenue lines are created at this stage. The next process step consists of the creation of the delivery with reference to the return order; the line items are copied into this document. The goods receipt is posted. This triggers the creation of the revenue lines (VBREVE) in service based revenue recognition according to the document data. Afterwards it is possible to run transaction VF44, an update of the control and revenue lines from the contract is generated. Additionally an accounting document is automatically created in FI, which posts to the D/R or U/R account Therefore the posting to the accounts depends on whether there is a balance on the D/R or the U/R account (revenue recognition is run and/or invoice is released to accounting).

Critical functions

Nothing


In accordance with the above process, where the invoice is related to the contract and the call off order is to be delivered, another scenario exists:

The call off order will be invoiced and delivered: When the call off order is created with reference to the contract, the saving of the call off order creates control lines (VBREVK). After the related delivery has posted the goods issue, revenue lines (VBREVE) are created. Important remark: The invoice has to be created in reference to the call off order (order-related invoicing) and NOT in reference to the delivery (delivery-related invoicing). In the following return order processing the return order will be create with reference to the call off order. The saving of the return order creates control lines (VBREVK) with the document number of the return order. There is NO link between the call of order and the return process. Also the return delivery and the return credit memo create their entries with the number of the return order.




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In order to implement the two scenarios, the following customizing settings must be configured in the sales document types:

The contract will be invoiced and the call off order will be delivered: The billing relevance of the contract item category should be ‘B’ or ‘I’, while the billing relevance of the call off order and return order item category should be ‘ ‘. The revenue recognition relevance of the contract / call off order / return order item categories should be set to ‘B’.

The call of order will be invoiced and delivered: The item category of the contract should be customized with revenue recognition relevance ‘ ‘, the item category of the call off order and the return order with ‘B’. The billing relevance of the contract item category should be ‘ ‘, while the billing relevance of the call off order and the return order item category should be ‘B’.


Processes currently not supported


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5 Processes currently not supported

Revenue recognition for the internal billing in case of Cross Company processing.

Revenue recognition for Taxes. Revenue recognition in Scheduling Agreements. Revenue recognition for Third Party Processing. Revenue recognition in Down Payments. Revenue recognition in proof of delivery (POD) process. Revenue recognition in combination with treasury hedging functionality. Changing of revenue recognition accounts before note 568227 was implemented

(important: restrictions in note 568227 have to be considered). Changing of document currency in the order/contract after invoicing/revenue

recognition. Standard process for migration of revenue recognition data from a former system

to SAP R/3. Every migration is individual for every customer. IS-OIL processes with revenue recognition. CRM with revenue recognition.

Revenue Recognition - Best Practice 6Knowledge Document

Monitoring of the revenue recognition data


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6 Monitoring of the revenue recognition data

6.1 Monitoring aspects

When monitoring the revenue recognition data, there are two parts of technically monitor this data and documents:

• FI-monitoring

• SD-monitoring The next question is, why is an accurate monitoring that important? It‘s the first time that SAP provides a functionality, which doesn‘t post the revenues directly with the billing document, but distributes the realisation of revenues over a certain range of periods. That means, there is a decoupling of billing document and revenues posting in FI concerning both, the time dimension as well as possible split of the revenue amounts. An accurate monitoring ensures, that despite the mentioned decoupling finally those revenues are realised, which are billed to the customer.




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6.2 FI-Monitoring

Check Account Balances

In order to monitor the revenue recognition process, the first step is to check whether there are balances on the accrual accounts or not. To display balances on accounts use transaction FS10N.




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detailed information is required, a drill-down to line item display is possible.

If




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Alternatively transaction FBL3N can be used in order to show the line items of an accrual account directly If open item management is used only the line items respectively the sales documents can be displayed which cause the balance on the account

Reconcile FI and SD Values

If balances are determined on the accrual accounts, they can be reconciled with the revenue recognition data in SD on an aggregated level. You can use transaction VF48 to compare the FI and SD values created by the billing process as well as by the revenue recognition run. The reconciliation can be done for a certain range of periods.

In order to get an overview what happened in total with a sales document, the document flow can be used first. Use to VA02/VA42 or VA03/VA43 to view the documentflow. A more value-oriented view is provided by the transaction VF45 from the sales perspective and FBL3N from the FI perspective. VF45 displays the deferred revenues,




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the unbilled receivables, the billed and the realized amounts on the level of a sales document item. FBL3N can be used to show the relevant FI postings related to a revenue recognition sales document using the assignment field as a selection parameter. The results of both views should fit together.

Automatic Clearing of Accrual Accounts

In order to monitor the accrual accounts effectively, it is recommended to use the automatic clearing process in FI with transaction F.13. Prerequisites are:

(1) Activate open item management in the master data of the accrual accounts (see customizing in chapter 9). Please note: If you haven‘t yet activated open item management, create new accounts and do not change the open item management flag for an existing, already in use account.

(2) As a basis for the automatic clearing of the open items the field ‚Assignment‘ has to be maintained in the customizing transaction ‚Prepare Automatic Clearing‘.




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(3) The standard revenue recognition fills the assignment field in the FI document in dependence from the revenue recognition type : revenue recognition type ‘A’: BSEG-ZUONR sales number and item number revenue recognition type ‘B’: BSEG-ZUONR sales number and item number revenue recognition type ‘D' BSEG-ZUONR invoice number and item number To enable an automatic clearing, the billing run has to fill this field in the same matter. Therefore an SD user exit has to be implemented (SAP enhancement SDVFX004)




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6.3 SD-Monitoring with VF45

VF45 Overview

The transaction VF45 is a more value-oriented view from the sales perspective. The transaction displays the deferred revenues, the unbilled receivables, the billed and the realized amounts on the level of a sales document item. The report created by this transaction contains detailed information at SD document item level:

• posted revenues

• invoiced values

• balances on unbilled/deferred accounts

• Status of the process

• All related follow-on documents There are some restrictions when using transaction VF45.

• always use the revised version of VF45 as distributed in note 787174, because the older versions

o do not display the costs (VPRS) o have no direct link to the SD and FI documents involved o don’t have sort, filter, subtotal, display or hide additional fields

• transaction VF45 shows for SD documents, for which a revenue cancellation was posted via VF46, both, a balance on the account for not invoiced receivables and also on the account for deferred revenue amounts. This display is incorrect, the posting are correct. See note 777118 for explanation




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Selection criterias of VF45

There is just one mandatory field in VF45, the field “sales document”. The other fields can be used to increase the number of document to be analysed.

• Company code

• Sales document type

• Sales document item

• Sold-to party




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As a result you will get the following report:

From this report you can reach the follow-on document by double-click.




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6.4 SD-Monitoring with VF47

VF47 Overview

The transaction VF47 is a central point in the early stage of analysis the Revenue Recognition on a customer’s system. If a sales document contains items relevant for revenue recognition, various errors may occur during the processing of items. The report of VF47 shows inconsistencies between the revenue recognition tables VBREVK, VBREVE and VBREVR and the appropriate sales documents. Nethertheless VF47 is a rather technical view on the revenue recognition tables. Sales-, billing- and FI-documents can be taken into account to search for inconsistencies beyond the revenue tables. VF47 should be scheduled as a frequent batch process. Run VF47 every week, at least once in a month to be sure that there are no problems or errors in your revenue recognition data. For an analysis this report should not run in update mode (check box „Test Run Without Update“ has to be on)

VF47 selection criteria

When starting VF47, you have to fill out a full screen of selection criteria. In the following text the fields will be described.

company code sales document type

sales document number mandatory entry. Enter the sales documents, you want to analyse.

item number item numbers of the sales document




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General Data, Packaging

Number of lines within a package accessing database on package level max. number of control lines

Check types:

Only check current Documents:

The systems only checks lines that have not been completed yet. This means that only those control lines are checked that do not have status ‘C’ (VBREVK-RRSTA)

Check Reference Lines: If this flag is set, the system checks whether all items relevant for revenue

recognition from the relevant billing documents have an entry in the reference table (VBREVR). Technically, the system reconciles the document flow with the reference table Docs From:

It is possible that not all billing documents may be used for a check after a migration. For example, this can occur if current contracts were copied from a preceding system. When you enter a date here, the system ignores all billing documents that were created before this time. Incl. FI: If this flag is set, the system attempts in addition to read the FI documents of

the billing documents in order to simulate non-existing reference lines (VBREVR) and to include them in the calculation of the control lines. Thus this analysis program can determine control lines from the detail lines even if reference lines are missing and then compare them with the control lines of the database.




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Compr. : If also the FI documents for the billing documents are read, remember that the

billing document and the FI document do not have to match completely. This is because the individual posting items can be summarized (compressed) in financial accounting. For this case, this flag must be set. The data required for simulating the missing reference lines is copied from the billing document. However, this only occurs if the billing document was posted to 'deferred revenues' or' non-billed receivables' only. If both accounts are involved, the reference lines cannot be simulated. This flag is not set by default. The system therefore attempts to link the billing document with the generated FI document. The system assumes that the billing items have generated posting items in chronological order. If this is not the case, the reference lines cannot be simulated here either.

Check Control Line Status:

This flag is set by default. It ensures that the system also reads the sales document data in order to check whether the status of the control lines is correct. This is necessary because both the reason for rejection on item level and the billing block on header and item level affect the control line status. With this information, the system determines the status on the basis of the detail lines and then compares it with the status of the respective control lines.

Check Total Amount :

If you set this flag, the system also reads the sales document types (if it has not done so yet) in order to compare the net item value (VBAP-NETWR) with the total accrued value of the control lines (VBREVK-ACC_VALUE).

Read Revenue Lines SD:

If you set this flag, the system is forced to always use the revenue lines from the revenue table (VBREVE) when determining the simulated control lines. Thus, balances and posted revenues of the 'new' control lines are based on the data updated in SD.

Read Revenue Lines FI:

If you set this flag, the system is forced to always use the revenues from the FI documents when determining the simulated control lines. Thus, balances and posted revenues of the 'new' control lines are based on the data updated in FI. The relevant FI documents are identified via the assignment number

‘Incl. Collective Run No:’

o Generally, the FI documents are generated on sales document level (BKPF-AWKEY) during the revenue recognition (VF44). However, you can carry out the revenue recognition (VF44) on collective processing level as




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well. In this case, the FI document does not get the sales document number as a reference number, but the collective number. That is, if the FI documents are generated on collective processing level, you must set this flag in order to find these FI documents. This may cause a slight performance loss.

Message at doc. level:

If you set this flag, the system does execute all checks selected, but the log is output on the basis of the sales document level. The system issues error messages only once per document although the errors may occur more often.

Only docs with error messages: Sales documents that do not have any errors are indicated with a green

checkmark in the log. If you set this flag, the system no longer displays these correct sales document numbers in the log, but only the incorrect ones with their corresponding error messages.

The report is able to make changes on the database. The scope of these corrections is defined by the following selection options. That is, if you want to carry out a correction, you must select at least one of these selection options. In addition, you must deselect the 'Test Run without Update' flag

Change control lines:

If you set this flag, the system overwrites the control lines that can be corrected. This means that the control lines (VBREVK) were redetermined via the revenue lines (VBREVE) and the reference lines (VBREVR).

Also for Currency change SD/FI:




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o If you set this flag, the system overwrites the control lines although there are different currencies in the control lines and existing revenue documents.

Delete control lines:

If you set this flag, the system deletes those control lines from the database that have neither revenue lines nor reference lines.

Create reference lines:

If you set this flag, the report attempts to regenerate missing reference lines (VBREVR). The basis for this is either the respective billing document or the FI document generated from the billing document.

Create revenue lines:

If you set this flag, the report generates revenue lines (VBREVE) if it detects balances on both clearing accounts (E16). In this case, the report always generates two revenue lines. Both lines have the same revenue value (VBREVE-WRBTR) with one value being positive and the other one being negative. The first line gets status (VBREVE-RRSTA) 'A' (to be recognized), the second gets status 'C' (recognized).

‘Posting period:’

Generally, the system determines a posting period for the new revenue lines to be created. This posting period is always the first posting period (descending sort order) of a sales document that no longer contains revenues to be recognized, that is, all revenue lines of this sales document that concern the determined posting period have status 'C' (VBREVE-RRSTA ='C'). However, if you want to create revenue lines for a certain posting period, you can specify a period here. This must be done in the 'YYYYPPP' format where 'Y' represents the year and 'P' the period.




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VF47 Error categories

6.4.1.1 Account determination errors:

E01 Missing Account for 'Restricted Revenues' in Control Lines: SAKRR.

E02 Missing Account for 'Non-Billed Requests' in Control Lines: SAKRRK E03 No Accounts Available in Control Lines.

E05 Missing Revenue Account in Revenue Lines: SAKRV E06 Missing Account for 'Restricted Revenues' in Revenue Lines: SAKDR E07 Missing Account for 'Non-Billed Requests' in Revenue Lines: SAKUR

E08 Missing Account for 'Restricted Revenues' in Reference Lines: SAKRR. E09 Missing Account for 'Non-Billed Requests' in Reference Lines: SAKRRK.

6.4.1.2 Inconsistencies between VBREVK / VBREVE/ VBREVR

E04 No Control Lines Found. E14 No Detail Lines Available, although Time-Related Revenue Recognition E17 No Reference Lines Available for Billing Document in Table VBREVR.

6.4.1.3 Incorrect values / balances

E10 Differences in Total Accrual/Deferral Amount: E11 Differences in Balance: WRBTR. E12 Differences in Recognised Revenues: RVAMT. E15 Control Lines with Balance for 'Restricted Revenues' and for 'Non-Billed Requests'. E16 Detail Lines have Determined Balance for 'Restricted Revenues' and for 'Non-billed Requests'. E18 Total Amount Difference for Control Lines and Sales Document Item: E24 Total amount difference for control lines and billing item:

6.4.1.4 status problem

E13 Different Status found: RRSTA.




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6.4.1.5 Currency problem

E19 Currency Differs in Control Lines and Revenue Lines. E20 Currency Differs in Control Lines and Reference Lines. E22 Currency Differs in Accounting Document and Control Lines.

6.4.1.6 Lock problem

E21 Document in Processing. E23 System Error: Document Could Not Be Blocked.

6.4.1.7 Assignment problem

E25 Error during determination of posted values on account: Revenues not posted! E26 'No FI documents found. Revenues not posted!'

The complete explanations find in the note 399777 and 542161. Schedule VF47 on a weekly basis and review errors. If errors occurs please contact SAP support. Important precondition for running VF47 is the implementation of all notes for the VF47, see below.




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38514 Repor

73949 VF47:

717473 VF47: No error code flag with mixed types

70695

(optio VF47: Package processing via control lines

66074 Incorr

65601 al) Autho

60033 Incorrect status determination (header) in VF47

59014 Minor 47)

57884 Activa

54216 Error

536984 Extension of syntax warnings in VF47

52730

(rrrel= Incorr 7

769103 (rrrel= D) VF47: Error E17 in case of several documents

39 Report: consistency check of revenue tables (VF47)

9 t for saving sales documents without changes

5 Incorrect listing of E17 errors

5

nal)

2 ect error message E25 in VF47

3 (option rization check of update function VF47

4

3 subsequent corrections from Note 542161 (VF

0 tion: reference procedure VBRR in VF47

1 corrections in transaction VF47

1

D) ect messages with category "D" in VF4

9777




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6.5 SD Monitoring with VF48

VF48 Overview

This compare report serves to explain the balance of an accruals account used in the Revenue Recognition, or to check whether this balance corresponds to the SD data (VBREVx tables). Its primary aim is to trace balances and not to trace possible inconsistencies between SD and FI. Transaction VF47 (Inconsistency Check in Revenue Tables) is available for this purpose.

VF48 selection parameter

You must/can start the selection with the following selection parameters : 1. Company code (required entry field) Enter the company code of the accruals account to be checked. 2. G/L account ( required entry field) Enter the accruals account to be checked. 3. Posting period from/ to (required entry field) Enter the period to be checked in posting periods. 4. Indicator: Only Not Cleared Documents (optional entry field)

If you set this indicator, only actions with incomplete revenue recognitions (revenue postings and billing document postings) are taken into account, because only these postings are necessary for an explanation of the balance. However, to trace the balance, it may be necessary for the system to also display completed (cleared) revenue recognition processes. In this case, the indicator must not be set.

Results of VF48




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If the necessary selection parameters were set and the report is started, a split screen appears.




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6.5.1.1 Upper part of the screen - Balances

Here per currency different balances are displayed. For each currency in the form of a calculation. The calculation consists of the following: a) Balance from revenue recognitions This balance is determined from the posted revenue lines in the VBREVE table. These are the revenue amounts that were recognized in the selected period according to SD. b) Balance from billing documents This balance is determined from the posted, billing items in the VBREVR table that are relevant for revenue recognition. These are the revenue amounts that were deferred in the selected period according to SD. c) Balance from other postings If not only the revenue recognition process (VF44/VF46/VF01/VF02/VFX3) but also other FI transactions such as FB01 posted to the selected accruals account, then these values are not known in SD (VBREVx tables). This appears to result in an inconsistency between SD and FI, but there really is no inconsistency at all. d) Total balance This is the balance of the accruals account for the selected period that was determined in FI. If you now take the balance of revenue recognitions, minus the balance of billing documents and minus the balance of other postings, then the result should reflect the total balance in FI. If this is not the case, this result must be analyzed further, since there is an inconsistency between FI and SD. Transactions VF47 and VF45 (among others) are available for further analysis.




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6.5.1.2 Lower part of the screen - VBREVx rows (SD tables)

This is where SD detail data (VBREVx tables) concerning the selection at sales and distribution document item level is listed. (The total in the 'Balance' column must equal the total balance in FI). If the totals are different, there are inconsistencies between FI and SD

The following values are displayed for the items: a) Billed revenues For the relevant document item, the revenue billed in the selected period is displayed, based on the billing items relevant for revenue recognition (this is the revenue that was posted to the selected accruals account). Data is retrieved using the reference line table (VBREVR). b) Recognized revenues For the relevant document item, the revenue recognized in the selected period is displayed, based on the VBREVE table (this is the revenue that was posted to the selected accruals account). Data is retrieved using the revenue line table (VBREVE). c) Accrued total value This is the revenue amount of the document item to be recognized at accruals account level. Data is retrieved using the control row table (VBREVK) in which the relevant accrued total value is updated.




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d) Balance This balance at document item level is calculated by subtracting the recognized revenues from the billed revenues. 6.5.1.3 Additional function

In addition to the screen described above, you can also receive more detailed information

a) Billing documents (F5) This is where the billing items that are relevant for the selected document item are displayed. A jump to the respective billing document is also possible.

b) Other FI documents (F6) If balances exist from other postings, the accounting documents which resulted in these balances are displayed here. A jump to the respective accounting document is also possible.

c) Overview (F7) This is where the revenue recognition data that is relevant for the selected document item is listed. This is done in Transaction VF45 - 'Revenue Recognition: Overview.' For more information, see Note 787174.


Functional enhancements


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7 Functional enhancements

Following is an overview of the technical extensions and new additions contained in the special Support Package . 46C SP49, additional notes from note 813850

470 SP23, additional notes from note 813850 Because of their size and complexity, these modifications cannot be performed manually or by using the SAP Note Assistant. The functions of each extension are described in detail in the composite SAP Note 800983. 1. Updating revenue recognition data on sales document

In some cases, revenue recognition data has to be redetermined, when goods are issued or invoices are created. This means, that the sales document also must be changed to reflect the new data. Previously, the data had to be updated using report ZZ_SALES_DOC_CHANGE (manually or as a job). Now, report ZZ_SALES_DOC_CHANGE has been replaced by transaction VF42 and report SDRRAV54. There are now two available options:

Immediate update of sales documents, when invoices are created and the issue of goods is posted. Flagging documents, that are to be updated and updating them at a later time by calling transaction VF42.

2. Modification of locking logic in VF44/VF46

The processing logic in transactions VF44 and VF46 has been changed to enable running VF44/VF46 in parallel with invoicing. The user interface has also been improved. Users receive detailed information about which revenues are to be posted. After they are posted, the up-to-date values are displayed on screen.

3. (Manually) completing contracts / correction rows for contracts For contracts, there was no definition in the system to state, when a process was finished. To deal with this, a new DDIC field was set up in tables VBUP/VBUK (MANEK = manual end of contract). Using this field, contracts can be closed or completed. A revenue recognition correction row for contracts can still be created with it.


Functional enhancements


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4. Status determination VF44 sets the status in VBUP. VF44 also writes an entry in table VBREVC. The overall status is then set by program SDRRAV54 (see point 1).

5. Report for reconciliation/reproduce-ability of accruals accounts

With a new report (transaction VF48), the balance of an accruals account can be analyzed across periods. You must use notes 798033 and 780126 to be able to run this report. They create the necessary data model. If you do not use these notes, transaction VF48 will not work with the documents.

6. Extension of transaction VF45

The report was set to ALV GRID. The control rows are displayed and VBREVE can be displayed. VPRS is still incorporated into the display, and links to the associated SD and fixed documents are possible.

7. Changing the cancellation update VF46

The field REVFIX was added to table VBREVE. With this field, source and cancellation lines can be updated separately. This is necessary to display cancellation rows in the process and data control functions more clearly.

8. Error handling in account determination

Account determination is not interrupted, if a condition, that is relevant to revenue recognition, is entered, but for which no accruals account was specified in customizing. Only when all conditions have been processed, the system returns the incomplete notification.

9. Archiving for the revenue recognition tables

A new archive object (SD_VBREV) is available. Archiving is now independent from the order or invoicing. It does not take place until the source objects have been archived.

Revenue Recognition - Best Practice 8 Restrictions from SD side Knowledge Document


8 Restrictions from SD side

8.1 General restrictions

The order/contract has to include a billing plan or at least contract data, if you are using time related revenue recognition (A or D).

The document type for the revenue recognition document is 'RV'. This assignment is hard coded and an internal number range is mandatory.

When using report ZZVF44HN (VF44 in the background) and an error occurs during the posting of FI documents, the system triggers command ROLLBACK WORK and thus the creation of the accounting documents is prevented for the entire packet and an error log is written. A current processing packet consists of a maximum of 999 control lines. (valid only for systems before Rel 46C, Sp 49 or Rel 470 Sp 23)

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8.2 Account restrictions

Separate accounts for G/L account and deferred revenue account have to be maintained in customizing, transaction VKOA (see note 777996).

Third account for the unbilled receivables must be maintained in customizing, transaction OVUR (see note 777996).

The G/L account must be different from the deferred revenue account and from the unbilled receivables account. Otherwise no ‘real’ revenue recognition can take place.

Note 568227 has to be implemented. There must be no change of the revenue recognition accounts in case of

contracts with call-off orders using revenue recognition relevance ‘B’.

8.3 Cost restrictions

In the customizing of CO-PA the costing based profitability analysis has to be active (see transaction KE4I).

If in the CO document the value of each condition has to be listed, there must be different accounts for each condition.

With the revenue recognition functionality costs will be passed to CO-PA during the revenue recognition run, if the following preconditions are met:

o VPRS condition has to be statistical and KNTYP has to be ‘G’ o The item must not have an account assignment object associated with it.

Relevant account assignment objects are: AUFNR, VBELV / POSNV, PS_PST_PNR.

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This means that posting of VPRS condition for items relevant for revenue recognition depend on the non-existence of an account assignment object. If the item has an account assignment object, VPRS will be ignored during the revenue recognition run and the costs are posted with releasing of the invoice. In this case revenues and costs are posted at different times.

If the VPRS condition is set as accrual-relevant cost condition (XKOMV-KRUEK = ‘X’), the cost (VPRS) is posted directly as an accrual in the financial accounting. An accrual of the costs in the revenue recognition does not occur, that is, neither during the billing nor during the actual revenue recognition the cost is considered.

A single statistical VPRS condition without a revenue condition cannot be processed. To post a VPRS condition by the revenue recognition and not by billing, the system requires a relevant pricing condition.

When using time based revenue recognition the cost amount per period is calculated from the total cost amount in the same way, the revenue per period is calculated:

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ed. o When using a periodic billing plan the value of the VPRS condition is

considered in each period. o When using partial billing plan the value of the VPRS condition is split.

When using performance based revenue recognition the total cost amount for the event is posted in the period the event occurs. Exceptions: - If the goods issue posting is non-valuated the costs are determined from the sales order item. - If the valuation is done at item level in a batch material the costs are determined from the sales order item.

8.4 Adjustment restrictions

There are different changes possible, which will affect revenue recognition data: o time adjustments o price adjustments

Time adjustments can be: o changes of the contract data o changes of the billing plan data: end date (FPLA-ENDAT)

dates from (FPLA-LODAT), dates to (FPLA-TNDAT).

o add settlement periods manually o delete settlement periods manually

Price adjustments can be: o change of a condition value in the sales document o change of a condition value in the billing document o add a condition in the sales document

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o add a condition in the billing document

If a billing plan is used, the billing plan data has to be updated after the changes, otherwise there is no VBREV* update. Preconditions:

o The Corr field (FPLA-AUTKORR) has to be set, so that a correction settlement period is created within the billing plan and then the VBREV* tables are updated according to the change.

o In the customizing of the used data category, which is assigned to the billing plan type, the pricing type must not be set to ‘B’. Then the billing value will be redetermined and the VBREV* tables are updated (except for the settlement periods that are invoiced).

If a condition is added manually in the invoice, not in the contract/order, and the new condition is using separate accounts, the related conditions have to be classified in a way that they are no longer relevant for revenue recognition. The value of those conditions will be posted directly to a revenue account and not to a clearing account. Please have look to note 496721. This issue applies when using revenue recognition method ‘A’ or ‘B’.

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If a condition is added manually in the sales document and also a time adjustment is done, e.g. a new settlement period is added, the value of the new condition is populated in revenue lines for the entire validity period and not only for the new settlement period.

o If the new condition has its own G/L account, separate revenue lines are created.

o If for the new condition the same G/L account is determined as for the other conditions, the existing revenue lines are updated and, in case of already recognized revenues, adjustment lines are created.

This is standard functionality due to the fact, that pricing occurs at item level and not at the level of the settlement periods. No check is done to see, if the condition is only valid for one settlement period.

If the net value to be recognized in the item relevant for revenue recognition will be changed and if revenues have already been posted, the system must enable a correction posting for the difference amount. This means, that the system considers the new situation in whole and checks, which correction is necessary by comparing the old and the new amount for each period. The total difference is added to the value of the first open period (where VBREVE-RRSTA = 'A'). For the new periods the amount, which has to be recognized according to the new net value, will be set.

If a sales order is relevant for performance based revenue recognition and adjustments are necessary in case of under/over the value, which will be invoiced has to be considered as revenue and posted to the G/L account. If the order item is relevant for ‘delivery-related-invoicing’ (FKREL = A), it is necessary to adjust the quantity of the order according the delivery quantity.

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If the order item is relevant for ‘order-related-invoicing’ (FKREL = B or I), it is necessary to adjust the revenues and to complete the order process. This is done by the system as soon as a reason for rejection is set.

If a sales order is relevant for performance based revenue recognition and adjustments are necessary in case of a pricing change in the sales order, the adjustment is only done, if there was no invoice created and if the delivery was completed.

8.5 Restrictions for specific processes

Contracts with call-off orders using revenue recognition relevance ‘B’:

o The call-off order items have to be linked to a contract item (e.g. assortment functionality). Manually added items in call-off orders without link to a contract item are handled separately.

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o There must be no changes of the revenue recognition accounts (D/R account / U/R account).

o There must be no over/under delivery of the call-off order items. If there is a difference between billed and recognized value, it has to be posted by a credit memo. The creation of a credit memo with reference to a credit memo request doesn’t lead to the clearing of the balance and therefore a credit memo has to be created with reference to the billing document.

o After invoicing, there must be no changing of condition values and/or time adjustments in contract and/or call-off-order.

o Before invoicing, there must be no changes to the condition values and/or time adjustments in the call-off order items, which are not done in the corresponding contract items.

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Other restrictions


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9 Other restrictions

9.1 REVREC and NON-REVREC Postings

Please keep in mind, that revenue recognition relevant invoice positions always post either to the D/R or the U/R account, but never to the revenues account.

Non-revenue recognition relevant invoice positions in the same invoice always post to the revenues account, but never to the D/R or the U/R account.

To distinguish revenue recognition postings from other postings without revenue recognition-relevance on the revenues account the revenue recognition-values can be determined via header field BKPF-AWTYP (VBRR or former VBAK).

For D/R and U/R accounts only revenue recognition relevant postings are allowed. This means that only postings from invoices (with revenue recognition-relevance) and postings from revenue recognition (VF44 / VF46) are allowed. Otherwise, reconciliation becomes difficult or impossible. For manually posted accruals or other adjustments, separate accounts shall be used.

9.2 Translation of foreign currencies

The translation of foreign currencies cannot be accomplished in logistics. The translation of foreign currencies is possible on line item or on balances. To

translate on a line item level, the account has to be set as ‘open item management’ otherwise the balances can only be updated in foreign currency.

According to IAS, balance sheet accounts are generally translated using the current closing exchange rate. Non-monetary items should be reported using the historical exchange rate (the exchange rate at the date the transaction was recognized). According to this unbilled- and deferred-accounts are not revaluated.

The P&L accounts are to be translated using the rates at the dates the transactions were recognized. Because this is maybe impractical, appropriately weighted average exchange rates can be used. These rules apply in case the local currency is the functional currency of the respective subsidiary (which is usually the case).

These rules for translation of foreign currency statements are similar to US- GAAP rules.

When the open items on the D/R or the U/R account are cleared at the end of the process (i.e. all invoices are created and all revenues are recognized), currency differences should be posted to a currency differences account (P&L account) affecting net income.

Revenue Recognition - Best Practice 10 Important to do´s Knowledge Document


10 Important to do´s

Use go-live assessment offering in the implementation phase. As transfer of old data into the revenue recognition processes is required,

consider SAPs consulting offering. Set up revenue recognition functionality by SAP certified SD and FI consultants

and approve it by the responsible Head of Accounting and, if necessary, review it by the external auditor of the company - see chapter 5.

Avoid program modifications.

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Don’t deactivate revenue recognition in the productive system landscape. Important remarks to consider in the job planning:

- Never run invoicing in parallel mode with the VF44 of the revenue recognition process. before 46C HP 49 or 470 HP 23 - Schedule report ZZ_SALES_DOC_CHANGE / SDRRAV54. on a regular basis to update the revenue recognition data in case of adjustments. Important precondition for running report ZZ_SALES_DOC_CHANGE is the implementation of note 568227.

Monitor continuously the results of the revenue recognition processes - see chapter 6.

Implement the latest support package, especially the latest notes on revenue recognition. Make sure that the functional enhancements are implemented - see chapter 7 and 11.

Consider the latest version of the SAP R/3 Revenue Recognition Best Practices Guide. The link can be found in note 779365.

Do not run VF44 and VF01 in parallel, when your system is not on the latest support package for your release.

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Revenue Recognition - Best Practice 11 Important notes Knowledge Document


11 Important notes

412660 Incorrect status in VBREVK after VA02, VA42, VF44

508305 List of the FI/CO documents contains too many

521671 No currency translation for billing documents

568227 Account changes causes data inconsistencies

598997 Incorrect correction lines for condition change

618110 Incorrect balance in VBREVK for billing item value

628020 Incorrect correction items with category B

681790 Incorrect FI documents for accrual periods with

696466 Incorrect adjustment line for type 'B' with call-off

731869 No cumulation in billing documents with posting

734577 No writing of control lines without detail lines

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Revenue Recognition SAP

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Transcript of Revenue Recognition SAP