Outgoing Royalties Reserves

Companies, who pay a licensor royalties for the exploitation of the rights transferred to an IP, can retain some of the royaties due as reserves, and first pay these one or more settlement periods later. This type of reserve creation is for example used in conjunction with product sales: This can lead to cancellations and returns, which subsequently reduce the sales-dependent royalties due.

One aspect of reserve creation is that reserves created during a settlement period must be released during a subsequent settlement period, which increases the royalties to be paid with a time offset.

An additional aspect is that any remaining reserves must be released by the final settlement of the contract at the latest, and any remaining amounts must be paid out (or any surplus royalties paid in spite of reserves must be paid back).

The type and scope of the reserves allowed is agreed in the license acquisition contract at item level, transferred to the Billing Engine Application IPMO, and evaluated during settlement.

Different mechanisms are required to create and release reserves according to the business model used. SAP supports the following as standard:

Reserves with distributed release
Reserves with rolling release

Example Example

Example 1: One-time reserve creation with distributed release

In this example, the reserves to be created are determined using the reserve rate from the royalties calculated up to this point. This event X occurs at the end of the first settlement period. Reserve release takes place with a fixed time offset up to the date Y. Reserve release is distributed evenly across the entire release period.

This graphic is explained in the accompanying text.

End of the example.

Note Note

The example Customizing settings support this type of reserve as a default. This means that the pricing procedure used in the standard billing type OR01 is set up for these reserves.

End of the note.

Example Example

Example 2: Rolling reserve creation over the entire contract validity period.

In this example, reserve creation takes place from the contract start to the contract end, and reserve release takes place with a defined time offset. You define this time offset and the reserve rate in the license acquisition contract.

This graphic is explained in the accompanying text.

Royalties: 1 $/unit., Reserve: 10 % of the royalties calculated.

Start of the navigation path Sales (gross): 1000 units Next navigation step 1000 units as the condition base 1000 units x 1 $/unit = $1000 royalties (gross) 90% x $1000 = $900 royalties (net minus the deduction of the reserve) End of the navigation path

End of the example.

Prerequisites

The additional fields used to control reserve administration are made available as feature attributes for the feature IPM: Reserves (IPM_RESERV). This feature is assigned to IPMO but is supplied in an inactive format. To use the new fields and reserve administration functions, you must activate the feature IPM: Reserves (IPM_RESERV) and generate the entire IPMO application again.

Path: Start of the navigation path SAP Implementation Guide Next navigation step Customer Relationship Management Industry-Specific Solutions Media Intellectual Property Management Billing and Settlement Outgoing Royalties Adjust Billing Engine Application for Settlement of Outgoing Royalties End of the navigation path

Alternatively, a simplified interface that allows you to activate the IPM: Reserves (IPM_RESERV) feature is available by way of the Configure Application Customizing activity (from SAP Customizing for Customer Relationship Management, select Start of the navigation path Industry-Specific Solutions Next navigation step Media Intellectual Property Management Billing and Settlement Configure Application End of the navigation path ).

Note Note

You can also subsequently include agreements about reserve creation in existing items and items that have already been transferred to IPMO. They then lead to reserves being created according to the agreements defined and then released during the next settlement.

End of the note.

The following settings should be made in the SAP example Customizing settings:

Activity	Menu Path
Define Date Types, Duration Types and Date Rules Define Date Profile	SAP Implementation Guide Customer Relationship Management Basic Functions Date Management […]
Modify date management for reserves with distributed release Reserve creation end (IPM_RSVCRETO) Reserve release start (IPM_RSVRRELFR) Reserve release end if required (IPM_RSVRELTO)
Modify date management for reserves with rolling release Reserve creation end (IPM_RSVCRETO) Reserve release end if required (IPM_RSVRELTO) Reserve period (IPM_RSVPER)
Modify pricing procedures for IPMO: 17IPM3 IPM acquisition billing document 17IPM7 IPM acquisition billing document without taxes 17IPM9 IPM acquisition billing document without tax rolling reserve	SAP Implementation Guide Customer Relationship Management Basic Functions Pricing Define Settings for Pricing Create Pricing Procedure
Modify condition types: 17R1 Reserve Rate OR 17R2 Reserve Release Rate OR 17R3 Reserve to be Released OR 17R4 Released Reserve OR 17R5 Remaining Reserve OR	SAP Implementation Guide Customer Relationship Management Basic Functions Pricing Define Settings for Pricing Create Condition Types
Modify data values: 2OR1 Created Reserve OR 2OR2 Released Reserve OR	SAP Implementation Guide Customer Relationship Management Industry-Specific Solutions Media Intellectual Property Management Basic Functions Pricing Define Data Values
Modify clearing control: For a detailed description of the individual paramters, see below.	SAP Implementation Guide Customer Relationship Management Industry-Specific Solutions Media Intellectual Property Management Billing and Settlement Clearing Control
New Read Rules: Item category IEB2 (BRI difference calculation) reads data value 2OA2 (royalties to be cleared) from ORIG Item category IEB2 reads data value 2OR1 (created reserve) from item category IEB2 Item category IEB2 reads data value 2OR2 (released reserve) from item category IEB2 In conjunction with accruals, corresponding entries also exist for the IER2 (accrual BRI item category.	See Modify Clearing Control.
New Update Rules: Item category IEB2 enters condition type 17R1 (reserve rate) in data value 2OR1 (created reserve) from ORIG Item category IEB2 enters condition type 17R2 (reserve release rate) in data value 2OR2 (released reserve) from ORIG Item category IEB2 enters condition type 17R5 (remaining reserve) in data value 2OR2 (released reserve) from ORIG	See Modify Clearing Control.
New Clearing Rules: Item category IEB2 clears against ORIG with sort priority 10 In conjunction with accruals, a similar entry also exists for the IER2 item category.	See Modify Clearing Control.
Modified Clearing Rules: The sort priority for the existing entries for recoupment of advances (IEB2 or IER2 recoup against item category IEA1) must be copied from the example Customizing settings or selected by the user.	See Modify Clearing Control.
New Requirements: 1CL1 (only for clearing items) This new requirement is assigned to some of the new read rules described above.	See Modify Clearing Control.

Caution Caution

If you are using your own condition types or data values for reserves, you need to make coding adjustments. For more information, see the release notes about Reserves for Outgoing Royalties and Clearing Control.

End of the caution.

Process

Agreeement and Release of Reserves in the License Acqusition Contract

Creation and release of reserves directly influences the payment of royalties to the licensor and is therefore part of the contractual agreements between the licensee and the licensor.

To maintain the parameters of the reserve:

Access the license acquisition contract for which you need to define a reserve.
In the contract hierarchy (Contract Overview pane), select the node corresponding to the Rights and Royalties or Royalties scope in which you are defining the reserve.
In the Reserves assignment block, select Edit and specify the reserve data.
Save the contract when you are finished.

Reserves are only created within the Billing Engine application. Reserves reduce the value of the OR billing document and therefore the payables that are posted against the licensor in FI. The FI System does not recognize reserves.

You release reserves following the same procedure when you need to bill standard billing due list items. For more information, see Billing.

Interaction with Other IPM Features

The feature IPM_ACCRU can be used to create accruals for future OR payments, which are due when the reserves are released. When accruals are calculated, creation and release of reserves is handled as they would be in a standard settlement. This means that an accrual billing document is also regarded as a standard settlement that was made in advance.

Constraints

No explicit integration with license sales contracts, IR billing documents, SD product sales or the Accrual Engine is intended for OR reserves via the connection of the data collector. Reserves are specified in the OR contract and observed in IPMO during settlement. Any external reserves calculated can only be included in IPMO by using the data collector (or by calculating the data values using a BAdI).