Use
You can use the POC Method on Basis of Revenue Planned by Period for the following:
You can use the POC Method on Basis of Revenue Planned by Period to do the following:
The POC method is often used in Britain and North America. Since German law does not allow unrealized profits to be reported, the POC method is used in Germany only for internal information purposes.
Prerequisites
You have planned costs, revenues, and quantities.
Choose a results analysis method in simplified Customizing for Product Cost by Sales Order under Period-End Closing
® Results Analysis ® Valuation Method.Features
R(PA) = R(p) cumulative up to results analysis period
POC = R(PA) / R(p) total
C(PA) = POC * C(p) = R(PA) / R(p) * C(p)
The revenue affecting net income equals the cumulative planned revenue up to the result analysis period.
Costs affecting net income are calculated by dividing the revenue affecting net income by the total planned revenue multiplied by the total planned costs.
If actual costs are greater than or equal to calculated costs, the system creates capitalized costs.
If actual costs are less than calculated costs, the system creates reserves for unrealized costs.
If actual revenue is less than or equal to calculated revenue, the system creates revenue in excess of billings.
If actual revenue is greater than calculated revenue, the system creates a revenue surplus. The revenue surplus is basically a reserve.
Both calculated revenue and calculated costs can be settled to CO-PA.
Capitalized costs, reserves for unrealized costs, revenue in excess of billings, and revenue surplus can be transferred to FI and EC-PCA when you settle.
Example
Suppose you have planned costs of USD 120,000 for your project.
You have planned revenues for each period as follows:
Period 01 |
Period 02 |
Period 03 |
Period 04 |
|
Revenues |
50,000 |
40,000 |
60,000 |
50,000 |
Total planned revenue is USD 200,000.
Period 01
In period 01 you have actual costs of USD 20,000. You have not billed the customer. In results analysis, the system calculates the following data:
You then settle the following:
The following values are reported in CO-PA:
Profitability Analysis
Calculated revenue |
50,000 |
Calculated cost of sales |
30,000 |
Profit |
20,000 |
Capitalized profit is shown in the balance sheet. Definitions:
Revenue in Excess of Billings = Capitalized Costs + Capitalized Profit
In this example, capitalized costs are USD 20,000.
Capitalized profit is USD 30,000.
Because reserves of USD 10,000 are shown as a liability, the total unrealized profit capitalized is USD 20,000.
The income statement shows the following values:
Income Statement
Expense |
Revenue |
Actual costs 20,000 |
Revenue in excess of billings 50,000 |
Reserves for unrealized costs 10,000 |
|
Profit 20,000 |
|
50,000 |
50,000 |
Period 02
In period 02 actual costs increase to USD 80,000. You deliver to your customer and send him a milestone invoice for USD 100,000. The order is partially delivered and partially billed. In results analysis, the system calculates the following data:
You then settle the following:
The following values are reported in CO-PA:
Profitability Analysis
Calculated revenue |
90,000 |
Calculated cost of sales |
54,000 |
Profit |
36,000 |
The income statement shows the following values:
Income Statement
Expense |
Revenue |
Actual costs 80,000 |
Actual revenue 100,000 |
Revenue surplus 10,000 |
Capitalized costs 26,000 |
Profit 36,000 |
|
126,000 |
126,000 |
Period 03
In period 03 actual costs increase to USD 90,000. You deliver a second amount to your customer and send him a second milestone billing for USD 90,000. Total revenue is USD 190,000. The invoiced quantity is 40 units. The order is partially delivered and partially billed. In results analysis, the system calculates the following data:
You then settle the following:
The following values are reported in CO-PA:
Profitability Analysis
Calculated revenue |
150,000 |
Calculated cost of sales |
90,000 |
Profit |
60,000 |
The income statement shows the following values:
Income Statement
Expense |
Revenue |
Actual costs 90,000 |
Actual revenue 190,000 |
Revenue surplus 40,000 |
|
Profit 60,000 |
|
190,000 |
190,000 |
Period 04
In period 04 actual costs increase to USD 130,000. You deliver the remaining goods and send the customer the final invoice for USD 10,000. Total revenue is USD 200,000. The invoiced quantity is 20 units. The order is fully delivered and fully billed.
In results analysis, the system calculates the following data:
You then settle the following:
The following values are reported in CO-PA:
Profitability Analysis
Calculated revenue |
200,000 |
Calculated cost of sales |
130,000 |
Profit |
70,000 |
The income statement shows the following values:
Income Statement
Expense |
Revenue |
Actual costs 130,000 |
Actual revenue 200,000 |
Profit 70,000 |
|
200,000 |
200,000 |
The project has a total profit of USD 70,000.
See also:
For detailed information on projects, see the document LO Project System.