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 Time-Related Revenue Recognition


Using time-related revenue recognition, you can recognize revenues over a specific period of time . An example would be revenue recognition for the duration of a service contract.

In time-related revenue recognition, the revenue between a specific start and end date is recognized in equal proportions . The start and end dates are determined on item level in the sales document. The number of periods between these dates is determined using the financial calendar for the company code assigned to the document.

You can use time-related revenue recognition for the following objects:

  • One-time billing document items

  • Periodic billing plans

  • Milestone billing plans

Time at which revenue recognition is carried out

You can determine whether revenue recognition for sales document items is carried out at the point of sale/contract or later when the billing document is created. You make the control settings in Customizing in the "Determine Revenue Recognition Method“ section.

The following documents can be used as a reference for time-related revenue recognition:

  • Sales contracts/sales orders

  • Billing documents

  • Credit memo requests

  • Debit memo requests

    Example Example

    Time-Related Revenue Recognition

    You conclude a contract with a customer for a product, and invoice the customer for the full amount at the start of the contract validity period.The contract is for 12 periods and an amount of 12,000. This means that over the contract duration of 12 periods, an amount of 1,000 is recognized per contract period.

    End of the example.