Home S4HANA Event-Based Revenue Recognition in S/4HANA 1610

Event-Based Revenue Recognition in S/4HANA 1610

by Ugur Hasdemir
3 comments
Event based Revenue Recognition App

In this blog I will explain the new Event-Based Revenue recognition functionality in S/4HANA 1610.

The Purpose of event based revenue recognition in a nutshell:

  • Real-Time Reporting
  • No Reconciliation
  • Full Transparency

With Event-Based Revenue Recognition, postings to relevant account assignment objects will lead to revenue recognition calculations. The basis for the revenue recognition calculations are all document line items that are assigned to the account assignment object.

Processes that do not write a prima nota do not result in any real-time revenue recognition postings (for example, changes of plan data do not directly result in revenue recognition postings). If necessary, period-end closing postings (periodic revenue recognition) will correct the event-based postings.

In S/4HANA 1610 only the Sales Project with contract type Fixed Price, Time & Expense and Periodic Billing is supported as account assignment object.

As mentioned, the basis for the revenue recognition calculations are all document line items that are assigned to the account assignment object (Project in this case). The entry of a source document (e.g. time confirmation), produces two separate journal entries:

  • A journal entry for the initial cost or revenue posting
  • A journal entry for the revenue recognition posting

Event Based Revenue Recognition Posting

Supported Revenue Recognition Proceedings

The below Revenue Recognition proceedings and billing types are supported in the current release:

  • Cost/Working Hours Based (POC) – Fixed Price Billing
  • Invoice Based (POC) – Fixed Price Billing
  • Cost Based (T & E) – Time & Expense Billing
  • Time Based Revenue recognition – Periodic Billing
  • No Deferral – All Types of Billings
  • Completed Contract – All Types of Billings
  • Manual Revenue Recognition – All Types of Billings

Customizing steps for event based revenue recognition

In the S/4HANA 1610 system all the required customizing in Cost Object Controlling – Event Based Revenue Recognition must be done. I won’t bother you with the customizing steps in detail but it consists of the following:

  • Source Assignment
  • Source Assignment and Posting Rule
  • Result Analysis Key
  • Document Type and Financial Statement Version

Sales Project with T&M billing and Cost Based POC

Let’s see how Event-Based Revenue Recognition works.

In this example I use a sales project with T&M billing and Cost Based POC. The time confirmations are posted as expense and realized revenues are posted based on DIP profile. Invoices are posted to P&L and reposted to deferred Revenue.

Sales price for man hours is € 100 and cost price is € 50. The process steps are as below.

The yellow outlined steps are the postings resulting from the event based revenue recognition. In addition the cost object to which the postings belong are indicated.

Sales Project with T&M Billing

Sales Project with Periodic Service and Time Based Billing

Confirmations are posted as COS adjustments / WIP. Invoices are posted as realized revenues and reposted to deferred revenues. COGS are calculated and posted based on DIP profile and COGS will post accrued costs. The periodic run recognizes cost and revenues time based on the basis of the invoice schedule / billing plan.

Sales Project with Periodic Service

 

New App: Event Based Revenue Recognition

The purpose of this new app is to monitor revenue recognition postings and perform manual adjustments.

Event based Revenue Recognition App

The object list displays all billing elements that are relevant for the event-based revenue recognition with the value posted on the object in separate columns for actual, accrued/deferred and recognized values.

It is possible to select one object and drill-down to the details.

Event Based Revenue Recognition App Details

It is possible to enter temporary manual adjustments through the app. Entered manual adjustments will be cleared again with the next periodic revenue recognition run.

Event Based Revenue Recognition App Manual adjustment

Next to manual adjustments it is also possible to enter reserves. Manual Reserves will not be cleared again with the next periodic revenue recognition run. The adjustments have to be cleared manually if needed.

Event Based Revenue Recognition App provision

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3 comments

AR January 28, 2018 - 01:00

Hello Ugur ,
I need some help for Event Based Revenue Recognition . Are you able to help ?

Reply
Rahul Suri November 21, 2018 - 13:44

Thanks for the article.
1. Please advise for the above demo what
(1) Revenue Recognition method was used
(2) What source for Plan Values

Reply
Monika Patel March 15, 2019 - 08:53

In 1709 , can Revenue be recognized for standard sales order ?
I am looking for Some kind of LIGHT RAR, as SD revenue recognition is no longer available in S4

Reply

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