Example 1: Interunit Accounting Without Contract Liability
The following example examines the entries generated by PeopleSoft Contracts when PeopleSoft Contracts manages revenue for a fixed-amount contract line. In this example, the user did not enable contract liability recognition at the either the contract line or product group level.
First, establish a new contract with these parameters:
| Field Name | Value | Comments |
|---|---|---|
|
Contract Number. |
9999999 |
|
|
Contracts business unit. |
USA1 |
|
|
General Ledger business unit that is mapped to the Contracts business unit. |
123 |
The base currency for this PeopleSoft General Ledger business unit is USD. All balance sheet entries are managed on the PeopleSoft General Ledger business unit 123 books, including: contract liability, contract asset or inventory, and billed AR |
|
Billing business unit. |
|
All billing plans within the contract must be mapped to PeopleSoft Billing business units that are associated with PeopleSoft General Ledger business unit 123. |
|
Contract gross amount/currency code. |
100,000/DEM |
The contract was signed on January 1999, but no accounting is booked until there is activity against the contract. |
|
Contract/Billing currency. |
DEM |
|
To perform interunit accounting without contract liability, you:
-
Bill for the total contract amount.
PeopleSoft Contracts sends the billing information to PeopleSoft Billing, and PeopleSoft Billing books accounting entries upon finalization of invoice. The accounting month for the bill finalization is February 1999. In February 1999, the contract total in the currency of the primary PeopleSoft General Ledger business unit (GLBU 123) equals DEM 100,000 @ 2/99 rate .580930 = USD 58,093.00.
-
Indicate that revenue should be recognized.
On the Accounting Distribution page you have split the revenue between two PeopleSoft General Ledger business units: 50 percent for GLBU 123 and 50 percent to GLBU XYZ. The currency code for GLBU XYZ is in CAD. The accounting month for this transaction is May 1999. The contract total in the currency of GLBU 123 = DEM 100,000 @ 5/99 rate .540435 = USD 54,043.50.
You run the Amount-based Revenue process to generate the revenue entry and its associated interunit transfer from GLBU 123 to GLBU XYZ, and the system uses GLBU 123's currency as the base currency code for the transfer: USD 54,043.50 * 50% = USD 27,021.75 @ 5/99 rate (USD/CAD) 1.4565 = CAD 39,357.18.
-
Harmonize the contract asset in PeopleSoft General Ledger by using PeopleSoft General Ledger functionality for balances with foreign and base amounts with differing currencies.
To enable this functionality, the Amount-based Revenue process and PeopleSoft Billing populate the foreign amount field with the DEM value of 100,000.
Revaluation in PeopleSoft General Ledger compares the May 1999 balances for both amount fields and translates at the current rate of .540435. The system compares the foreign amount = 0 (DEM 100,000 − DEM 100,000) at .540435 = 0 to the base amount = (USD 4049.50), then generates a reduction entry crediting foreign exchange gain or loss and debiting contract asset (in this scenario) for the difference = USD 4049.50.
This figure shows the interunit accounting distribution flow when contract liability is not enabled. The numbers in each box refer to the interunit accounting steps listed above.
The interunit accounting distribution flow when contract liability is not enabled is displayed. The numbers in each box refer to the interunit accounting steps listed above.
