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 Deferred Revenue Postings

Purpose

When a receivables document is posted, the system automatically posts revenues. These revenues become effective in the posting period in which they are actually posted. This means that these revenues are assigned to the posting period in which they were posted.

The regulations in some countries require that revenue accruals/deferrals have to be entered in the general ledger for revenues that do not become effective until some date in the future. Revenues become effective in the future, if the service upon which the revenue is based is actually performed in the future. Recognition of revenues is therefore independent of invoicing. Revenues and accrued/deferred revenues must be posted to separate general ledger accounts. Accrual/deferral is performed using deferred revenue accounts.

There are three types of revenue recognition:

  • Standard revenue recognition

  • Time-based revenue recognition

  • Event-based (service-oriented) revenue recognition

In the case of standard revenue recognition , posting to the revenue account takes place at the same time the receivable document is posted.

In the case of time-based revenue recognition , when the receivable document is posted, the dates on which the corresponding partial revenues are to be transferred from the deferred revenue account to the revenue account are already set.

In contrast to this procedure, in the case of event-based revenue recognition , it is the rendering of the actual service that leads to recognition of the partial revenues.

The following example serves to clarify the difference between time-based and event-based revenue recognition:

On 12/31/08 a business partner signs a maintenance contract amounting to 2,400. The machine is to be serviced regularly on the 15 th of every month during the year 2009. The business partner receives the invoice on 12/31/08.

In the case of time-based revenue recognition , the partial amounts become revenue-effective on the following dates:

1/15 revenue-effective 200

2/15 revenue-effective 200

: : :

12/15 revenue-effective 200

In the case of event-based revenue recognition , revenue recognition is determined by the service being provided. If the service engineer services the machine on 02/01 instead of on 01/15, in the case of event-based revenue recognition, revenue would not become effective until 02/01. This means that the partial revenue of 200.-- would not be transferred from the deferred revenue account to the revenue account until 02/01/09.