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Use

The method for time-related revenue recognition uses several basic dates and basic values, which are used during the revenue recognition process. These basic dates and basic values determine how revenues are implemented for time-related items. The following basic dates and values are used:

 

Start of Accrual Period

The accrual period start date determines the beginning of the period, when the recognitions should be carried out. You choose the proposed date, by entering one of the following keys in the document item category field Acc. period start in Customizing.

Start of Accrual Period: Options

Option

Description

Blank character

Not relevant

A

Proposal based on start of contract.

If you choose this option, revenue recognition proposes the start date of the item sales contract as the start of the accrual period.

B

Proposal based on start of billing plan.

If you choose this option, revenue recognition proposes one of the following dates as the start of the accrual period.

Milestone billing plan

The billing date of the first milestone

Periodic billing plan

The system uses the earlier of the following two dates.

Start date of the billing plan

Start date of the first settlement period

 

 

 

End of Accrual Period

The accrual period end date determines the end of the period, when the recognitions should be carried out. Then end date comes from the sales document, which contains the posted item.

The table below describes the logical determination of the accrual end date for revenue recognition.

 

Determining the End of Accrual Date Hierarchy

Billing Plan Type

Horizon

End of contract date

End of accrual period

No billing plan

Not available

Yes

End of contract date

Milestone billing plan

 

Not available

Not available

No

Yes

Last milestone date

End of contract date

Periodic billing plan

 

 

No

 

No

Yes

 

Yes

 

No

 

Yes

No

 

Yes

 

Last settlement period end date

End of contract date

Last settlement period end date

Last settlement period end date

 

 

No. of Accrual Entries

The number of accrual entries is identical to the number of posting periods, which have been identified at company level for the accrual period of an item.

The table below contains examples for calculating the accrual period.

No. of Accrual Entries: Example Calculations

Start of accrual date

End of accrual date

No. of Accrual Entries:

1.1.97

31.12.97

12

1.8.97

31.12.97

5

15.9.97

20.12.97

4

12 defined booking periods, one period for each month of a normal calendar year

Calculation of Reset Total Value

This refers to the determination of total value of a sales document item for revenue recognition in the system. The billing plan type used for the sales document determines which reset total value is calculated by the system.

The calculation for all billing plan types is shown in the table below.

Calculation of Reset Total Value: Hierarchy

Billing plan type

End of contract date

Calculation of reset value

No billing plan

Not available

Item net value

Milestone billing plan

 

No

 

Yes

Total value of all existing milestones

Item net value

Periodic billing plan

N/Y

Total value of all existing settlement periods

 

Calculating the Accrued Amount

The accrued amount is the amount, which revenue recognition posts for each item in the posting period in financial accounting.

Revenue recognition determines this amount by dividing the length of the posting period by the length of the accrual period and multiplying the resulting value by the reset total value. This invoice is shown as follows:

This graphic is explained in the accompanying text

 

Example Example: Standard Calendar Year

Your financial calendar contains 12 posting periods, which correspond to the 12 calendar months. At the same time you have a reset total value of 12000. If the length of your accrual period (in calendar months) is 12 and the length of your posting period one month, you can calculate your accrued amount as follows:

1000 = 1/12 *12000

 

 

Example Example: Non Standard Calendar Year

The table below shows a few posting examples, for companies whose financial calendar does not correspond to the normal calendar year:

Ex.

Period

Calculating period length

Calculating the amount

Amount per period

1

1 May to 27 May

27/31 or 0.87097 months

0,87098/12 * 12000

870.98

2

28 October to 29 November

33/31 or 1,0645 months

1,0645/13 * 12000

982.62

3

29 June to 16 July

18/30 or 0,6 months

0,6/13 * 12000

553.84

The denominator for calculating the period is determined by the length of the calendar month, in which the posting period begins.

 

 

 

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