Accounting for Revenue Recognition and Allocation in the Transaction Currency

When you use the transaction currency as the basis for revenue allocation and recognition for revenue contracts, consider the following:

• Subledger accounting source: Foreign Currency Treatment Indicator

  Use the performance obligation-level Foreign Currency Treatment indicator Subledger Accounting source to configure your accounting rules to choose which contract liability balance sheet account your monetary and nonmonetary journal entries are booked to. This enables you to direct your accounting distributions to a separate contract liability account in Oracle General Ledger in support of the Revaluation process. This is because the contract liability balances of nonmonetary performance obligations are converted at a fixed rate.

• Billing price variance

  The application calculates the difference between the conversion rate on a performance obligation before allocation and the conversion rate after allocation. This difference is called price variance. However, this price variance isn't to be booked as a foreign currency conversion gain and loss accounting entry. This is because it's a measurement of the prerecognition changes due to foreign exchange on the obligation before the allocation valuation is done, when creating the obligation and asset. As such, it's out of the scope of ASC 830 or IAS 21 for foreign exchange gain or loss accounting.

• Foreign currency gains and losses

  The Internal Revenue Service and other tax authorities don't authorize the inclusion of realized gains and losses for revenue and contract assets in the deductible realized gain number for tax reporting. As a result, this calculation isn't required within Oracle Revenue Management or its supporting accounting. The General Ledger Revaluation process handles the calculation of foreign currency gains and losses and the necessary accounting.