Prospective Accounting for Immaterial Price Changes in Subscription Products

You can use prospective accounting to reflect minor unit selling price changes for subscription products imported from Oracle Subscription Management.

Use this feature when processing immaterial price changes that don’t significantly alter the initial terms and the net consideration of the contract, such as price changes due to indexation. The impact on the price change impacts only current and future periods. This enables you to record the price changes without the need to restate any previously recognized revenue.

While performing price adjustments for a particular period of a subscription's recurring charge in Subscription Management, select Prospective as the Revenue Accounting option. When you select this option, Subscription Management sends:

• A revision line with the revised plan end date (the date until which the initial selling price is applicable).
• A new line with the new unit selling price and the start and end dates in which the new price is in effect.
• A second new line with the initial selling price for the remainder of the subscription.

For example, let's say there's customer contract with one subscription from 01-Jan-2023 to 31-Dec-2023 at a selling price of 100 USD per month, which is 1200 USD for the entire year. For an immaterial price decrease of 5 USD performed for March 2023, Subscription Management:

• Revises the initial revenue line with a line amount of 200 USD and an end date of 28-Feb-2023.
• Sends a new revenue line for March 2023 for the same item with a unit selling price of 95 USD, line amount of 95 USD, start date of 01-Mar-2023, and end date of 31-Mar-2023.
• Sends another new revenue line for the rest of the subscription period with a unit selling price of 100 USD, line amount of 900 USD, start date of 01-Apr-2023, and end date of 31-Dec-2023.

Because the price change is set to initiate prospective accounting, after processing these lines, Revenue Management performs prospective accounting on the customer contract where the transaction price is reallocated only from the contract revision date. Revenue recognized before the contract revision date remains intact.

In addition to price changes, you can also choose Prospective as the Revenue Accounting option in Subscription Management when performing these actions:

• Close: terminates a subscription.

  Subscription Management sends a revision line revising the plan end date. Revenue recognized until the termination date remains intact and the remaining transaction price on the customer contract in Revenue Management is reallocated among the open performance obligations.

• Amend: implies modifying a subscription by adding a new subscription product to it or by changing the attributes of a subscription product. In the case of the latter, the subscription product is closed and a new subscription product line is created with the revised attributes.

  Based on your setup, Subscription Management either:

  • Sends the new subscription as a new revenue line, which is created as a new customer contract in Revenue Management.

  • Sends the new subscription to be added to an existing customer contract.

  Revenue Management performs prospective accounting by reallocating the new transaction price from the contract revision date among the new and open performance obligations.

• Suspend: suspends a subscription.

  Subscription Management sends a revision line revising the plan end date. Revenue recognized until the suspension date remains intact and the remaining transaction price on the customer contract in Revenue Management is reallocated among the open performance obligations.

• Renewal: renews a subscription.

  Upon renewal, Subscription Management creates a new subscription. Based on your setup, Subscription Management either:

  • Sends the new subscription as a new revenue line, which is created as a new customer contract in Revenue Management.
  • Sends the new subscription to be added to the existing customer contract.

  Revenue Management performs prospective accounting by reallocating the new transaction price from the contract revision date among the new and open performance obligations.

• Pricing Term

  Whenever there's a change in the rate adjustment, Subscription Management sends a revision line for that pricing term with the new unit selling price. Revenue Management performs prospective accounting by reallocating the new transaction price among the open performance obligations from the contract revision date. Revenue recognized until a day before the contract revision date remains intact.