Show TOC

 Control of Revenue Recognition Based on IFRS/U.S. GAAP


There are different ways of controlling the revenue recognition process based on IFRS (International Financial Reporting Standards) or U.S. GAAP (U.S. Generally Accepted Accounting Principles).


Revenue Recognition

Activating the FASB solution

You can control specific processes for selected company codes, for example, activate the FASB solution. You use these functions to implement requirement FASB52 (Financial Accounting Standards Board Statement 52) in revenue recognition, for example:

  • You use a fixed exchange rate during the entire accrual period for the postings to the accrual accounts (balance sheet accounts).

  • Gains and losses from exchange rate fluctuation only affect the profit and loss account.

    If your company has processes relevant for revenue recognition that are in a foreign currency, you should activate this function. For more information, see SAP Note 891585 FASB52(SD) Transferring the exchange rate date to FI .

    Note Note

    Before it was possible to activate the functions for requirement FASB52 with this indicator, the following error message activated the functions: Message class VA, message 314. As soon as you have saved your settings in the IMG activity, the system controls the activation and deactivation based exclusively on these settings.For more information, see SAP Note 786266 and the system documentation for the Activate FASB Solution indicator .

    End of the note.

Activating the SD document update

With settings for the SD document update, you can determine how and when the sales documents that are relevant for revenue recognition are updated. You can choose from the following activation types:

  • Update SD documents immediately when costs arise (such as at goods issue)

  • Flag SD documents for update and update them later with the Update SD Documents transaction (VF42).

    Note Note

    Before it was possible to activate the SD document update using this indicator, you would have to use the following error message to control the update: message class VA, message 313.

    In the standard system, this message is a warning. The Update SD Documents transaction (VF42) is then used to activate the SD documents that are relevant for revenue recognition.

    If the message was flagged as an error message in your company (instead of a warning), the system would immediately update the SD document in the appropriate process step, such as during billing. This procedure can have a negative effect on performance.

    For more information, see SAP Note 780993 and the system documentation for the Activate Sales Document Update indicator .

    End of the note.
Revenue Recognition

Costs in the Sales and Distribution (SD) application are generally mapped using the cost (condition type VPRS) and posted to the Profitability Analysis application (application component CO-PA) using the billing document.

If the condition type VPRS is flagged as accrual-relevant, there is an accrual closeout in Financial Accounting and a posting is made to a cost account.

Depending on whether or not the costs are known at the time of billing , the system determines the cost as follows:

  • If the costs are known when billing takes place, the condition type VPRS contains the correctly determined cost. The cost does not have to be updated in this case (VPRS update function).

  • If the costs are not known at the time of billing, you must correct the cost at a later stage.

    • It might happen that not all vendor invoices are available at the time of billing, or that billing takes place before goods issue. In this case, the billing document takes the cost from the sales document or from the valuation segment in the material master record.

    • If prices are changed after billing, the goods issue posting is made with the new price.This means that the costs in the billing document do not correspond to the actual costs posted with the goods issue.If the process is accrual-relevant, incorrect costs arise in CO-PA and the relevant accrual account in Financial Accounting shows a difference.

      You must update the cost using the VPRS update function to ensure that approximately the correct costs are posted in financial accounting during a current process and distributed to the relevant billing documents, and that the correct costs are posted and distributed at the end of a process.

      For more information, see Updating the Cost .