Using service-related revenue recognition you can carry out recognition on the basis of a specific event. An example of this is revenue recognition for a service contract, where services are included.
For service-related revenue recognition, the accrual period is insignificant. The introduction of service-related revenue recognition supports amongst other things:
Revenue recognition for service-related items takes place at sales document item level. The supported documents contain:
– Release sales orders
– Release credit memo requests
Here you can see an example of service-related revenue recognition methods.
You agree a service contract with a customer and the whole amount is invoiced at the beginning of the contract’s validity. You can however only carry out recognitions if the agreed services are actually carried out. If the whole contract amounts to 15000 and the value of each individual service 3000, each time you carry out a service, the value is 3000. If you carry out the service once, the remaining 12000 counts as credit on a deferred revenue account, until you have carried out the remaining services.
In the following diagram, you will see a graphical representation of the revenue recognition processes used in this example.
Example of a service-related revenue recognition: