How Revenue Is Allocated Due to Immaterial Changes
When performing immaterial contract changes, the application redistributes unrecognized allocated revenue to the remaining open performance obligations only.
The change in revenue impacts only the current and future periods and doesn't impact revenue that has already been recognized.
For immaterial changes, the application:
- Uses the standalone selling prices on the contract revision date to reallocate unrecognized allocated revenue to new performance obligations.
- Uses the standalone selling prices on the contract inception date to reallocate unrecognized contract revenue to existing open obligations.
- Doesn't adjust or reverse recognized revenue for performance obligations that are fully satisfied as of the contract revision date.
- Prospectively accounts for revisions of performance obligations when the satisfaction measurement model is Period and the satisfaction plan name is Daily Revenue Rate, Partial Periods.
- Retrospectively allocates revisions for accounting contracts that were generated based on performance obligation templates.
- Retrospectively allocates revisions for accounting contracts that were allocated based on residual standalone selling price performance obligations.
- Retrospectively accounts revisions of performance obligations when the satisfaction measurement model is Quantity or Percent and the satisfaction plan name is Fixed or Variable Revenue Rate, Daily Rate, All Periods.
- Reverses or adjusts initial performance accounting entries for terminated obligations and other open obligations on the contract revision date.
- Books and adjusts accounting entries related to billing of immaterial revisions when billing amounts are imported into Revenue Management.
If most of your contract changes for a particular source document type are immaterial in nature, you can assign an application default value in the Manage Source Document Types page. Set the Immaterial Change Type to Immaterial. You can override the immaterial change type on the Revenue Basis Data Import template when importing revisions from your source applications. This setting applies for both the ledger and nonledger currency denominated revision lines.
Let's look at the attributes you need to populate to process an immaterial change. Enter values for these attributes in the Customer Contract Source Document Lines table:
| Attribute | Value |
|---|---|
| Termination Date | The date the line was terminated and will no longer recur automatically. |
| Immaterial Change Type | Immaterial |
| Contract Revision Date | The date on which the customer contract was revised. |
Use the Revenue Basis Data Import template to import revisions to your order lines or sales data from your source application to reflect the contract modifications to be applied.
After performing an immaterial change, review the immaterial change calculations in the Edit Customer Contract page. Click the Performance Obligations or Promised Details tab and view the calculations in the Immaterial Revision Details subtab in the Details section. The Immaterial Revision Details subtab displays only contract revision details associated with immaterial changes.