Many companies require that revenues are calculated according to time period. This means that the revenues must be implemented 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 separate revenue recognition from the billing process. The R/3 system offers a flexible solution to companies using various methods of revenue recognition.

Revenue recognition enables revenues to be calculated and established easily and flexibly using set rules. This new function is part of the Sales and Distribution (SD), Financial Accounting (FI) and Controlling (CO) application components and enables comprehensive and integrated revenue recognition.

The new revenue recognition function lets you decide when revenue recognition should take place. You can select those methods which are relevant to your area and which best meet your company’s requirements.

These methods include:

• Revenue recognition at the point of billing (standard method)

• Time-related revenue recognition (the revenues are implemented between set specific dates in equal proportions)

• Service-related revenue recognition (the revenues are realized on the basis of a specific event, e.g. a delivery)

Many systems require that the revenues from a sale are indirectly credited after invoicing in the general ledger. The revenue recognition function gets rid of this restriction and enables you to separate revenue recognition from the billing process. On the basis of the criteria which you have established for the contract or order item, you can implement revenue before, during and after billing.

A further function of revenue recognition is the grouping and surveillance of revenues in two additional general ledger accounts.

• non-billed receivables
• calculated revenue

You can see in these accounts whether revenue has been implemented but not yet set up in the invoice or has been set up in the invoice but not yet implemented.