You can use the Revenue-Based Method Without Profit Realization for:

• Sales orders
• Projects

Revenue-based results analysis without profit realization does not calculate a profit as long as the actual revenue is less than the planned cost.

Revenue-based results analysis without profit realization allows you to:

• Create reserves for unrealized costs

• Create reserves for imminent loss

• Use milestone billing

The system only reports a profit if the profit has been realized on the market.

Revenue-based results analysis without profit realization allows you to follow conservative balance sheet guidelines.

You have planned costs and revenues.

POC = R(a) / R(p)

R(PA) = R(a)

If R(a) < C(p) then C(PA) = R(a)

If R(a) >= C(p) then C(PA) = POC * C(p) = R(a) / R(p) * C(p)

The revenue affecting net income equals the actual revenue. It can be passed to CO-PA together with the calculated cost of sales.

If the actual costs are greater than the costs affecting net income, the system creates capitalized costs.

If the actual costs are less than the costs affecting net income, the system creates reserves for unrealized costs.

Inventory values and reserves for unrealized costs can be transferred to FI and EC-PCA when you settle.

The calculated cost of sales is zero as long as your actual revenue in the period is zero. The capitalized costs then equal the actual costs of the period. Earnings are only calculated when revenues have been received.

If the actual revenue is less than the planned cost, the system sets the costs affecting net income to be the same as the revenue affecting net income in the amount of the actual revenue. In this case no profit is calculated. Capitalized costs and reserves can be reported at this point.

You have planned revenues of USD 200,000 and costs of USD 120,000 for your sales order.

In period 01 you have actual costs of USD 20,000 but no revenues. In results analysis, the system calculates the following data:

• Capitalized costs in the amount of the actual costs (USD 20,000)

• Revenue of USD 0

• Cost of sales of USD 0

• You then settle the following:

• The capitalized costs to FI and EC-PCA
• No cost of sales and no revenues to CO-PA

The following values are reported in CO-PA:

The income statement shows the following values:

In period 02 the actual costs increase by USD 60,000 and now total USD 80,000. You deliver to your customer and send him a milestone invoice for USD 100,000. The order is partially delivered and partially billed. In results analysis, the system calculates the following data:

• Cost of sales of USD 100,000

• Reserves for unrealized costs of USD 20,000 using the formula Reserves for unrealized costs = Actual costs minus calculated costs if Actual costs < Calculated costs

• Revenues: USD 100,000

You then settle the following:

• The cost of sales to CO-PA

• The revenues to CO-PA

• The reserves for unrealized costs to FI and EC-PCA

The following values are reported in CO-PA:

The income statement shows the following values:

In period 03 the actual costs increase by USD 10,000 and now total USD 90,000. You deliver a second amount to your customer and send him a second milestone billing for USD 90,000. The total revenue is USD 190,000. The order is partially delivered and partially billed. In results analysis, the system calculates the following data:

• Cost of sales of USD 114,000 using the formula Calculated costs = Actual revenue x Planned costs / Planned revenues

• Reserves for unrealized costs of USD 24,000 using the formula Reserves for unrealized costs = Actual costs less calculated costs if actual costs < calculated costs

• Actual revenues of USD 190,000

You then settle the following:

• The cost of sales to Profitability Analysis

• The revenues to CO-PA

• The reserves for unrealized costs to FI and EC-PCA

The following values are reported in CO-PA:

The income statement shows the following values:

In contrast to period 02, in period 03 a profit is reported. This is because the actual revenues now exceed the planned costs.

In period 04 the actual costs increase by USD 40,000 and now total USD 130,000. You deliver the remaining goods and send the customer the final invoice for USD 10,000. The total revenue is USD 200,000. The order is now fully delivered and fully invoiced.

In results analysis, the system calculates the following:

• Cost of sales of USD 130,000

• No reserves for unrealized costs. The existing reserves are canceled.

• Revenues of USD 200,000

You then settle the following:

• The cost of sales to CO-PA

• The revenues to CO-PA

• The cancellation of the reserves to FI and EC-PCA

The following values are reported in CO-PA:

The income statement shows the following values:

The order has a total profit of USD 70,000.