Many companies require period-based revenue accrual. The revenues must be recognized within the posting period in which the service was performed, not in the period in which the billing document was created. The revenue recognition functions in the SAP system allow you to fulfill these requirements and separate revenue recognition from the billing process. SAP provides a flexible solution with which companies can use various different methods of revenue recognition.
In revenue recognition, revenues can be accrued and shown easily and flexibly using defined rules. The 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 revenue recognition function lets you decide when revenue recognition should take place. You can select the methods that best meet your company’s requirements from a choice of standard methods.
The methods include the following checks:
● Revenue recognition at time of billing (standard revenue recognition)
● Time-related revenue recognition
The revenues are recognized in equal proportions between specific dates.
● Service-related revenue recognition
The revenues are recognized on the basis of a specific event, such as a delivery.
Many systems require that revenues from a sale are credited in the general ledger straight after invoicing. The revenue recognition functions do not have this restriction, and enable you to separate revenue recognition from the billing process. On the basis of the criteria you have defined for the contract item or order item, you can recognize revenue before, during, or after billing.
Another function of revenue recognition is the grouping and monitoring of revenues in two additional general ledger accounts:
● Non-billed receivables
● Accrued revenue
These accounts let you monitor whether revenue has been recognized but not yet invoiced, or invoiced but not yet recognized.
Posting the costs
In revenue posting, the costs are also posted to the profitability analysis (CO-PA). The costs are only posted if no other cost account assignment is being used (for example, account assignment to the sales order or project). The internal cost is used in the standard for cost posting. This is controlled using condition category G.
This means that period-based posting of the costs is also possible.