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Function documentationAllocation Effect

 

Revenue Accounting can represent the effect of price allocation on a differential basis. Allocation effect indicates how much the allocated prices differ from their original prices. When the system performs price allocation, it aggregates the original prices of all performance obligations and distributes the total amount among the performance obligations. In this redistribution process, some performance obligations gain value while other performance obligations lose value in their allocated prices.

Performance obligation-level allocation effect

This amount indicates the difference effected on a specific performance obligation as a result of price allocation. A positive amount indicates that the allocated price is greater than its original price. A negative amount indicates that the allocated price is less than its original price.

Contract-level allocation effect

This amount indicates how significantly price allocation has occurred in the contract. This amount is the total amount of value that has flowed from some performance obligations to others in the contract.

Prerequisites

The system requires that a reserved condition type is defined for representing performance obligation-level allocation effect amounts. This condition type is reserved for Revenue Accounting, and it must differ from any other condition type used in the operational system. We recommend that you configure a condition type in the operational system to make sure no other condition type uses the same name.

This setting is available in the following Customizing activity: Start of the navigation path Financial Accounting (New) Next navigation step Revenue Accounting Next navigation step Revenue Accounting Contracts Next navigation step Condition Types Next navigation step Define Reserved Condition Types End of the navigation path

Example

Assume that your company sells a bundle for EUR 40. The bundle is composed as follows:

  • Two pieces of product A that sell for EUR 10 each

  • One piece of product B that sells for EUR 20

Price allocation is performed as follows:

Performance Obligation

Sales Order Item

Transaction Price

Allocated Amount

Adjustment

POB1

Product A

EUR 10 * 2

EUR 10

EUR -10

POB2

Product B

EUR 20

EUR 30

EUR +10

In this case, the allocation effect of the entire contract is EUR 10.