How Event-Based Revenue Management Works

Receivables automates the timing of revenue recognition for both manually entered transactions and transactions imported using AutoInvoice. This automated revenue management process helps you to comply with the strict revenue recognition requirements mandated by US GAAP and International Accounting Standards.

The event-based revenue management process evaluates each transaction and decides whether to immediately recognize revenue, or temporarily defer revenue to an unearned revenue account based on the contingencies assigned to the transaction. Revenue is subsequently recognized according to the removal event assigned to each contingency.

Note: Even if you set up for automated revenue recognition, you can still manually adjust revenue on transactions. Once you manually adjust revenue, Receivables discontinues the automatic monitoring of contingencies.

Settings That Affect Event-Based Revenue Management

These settings affect event-based revenue management:

• Require salesperson Receivables system option: You must enable the Require salesperson system option to use revenue recognition.

• AR_INTERFACE_CONTS_ALL table: You can use the AR_INTERFACE_CONTS_ALL table to assign revenue contingency IDs to billing lines, before importing transactions using AutoInvoice.

  Note: When importing parent and child transaction lines, AutoInvoice automatically copies any contingencies from the parent line to the child lines.

• Revenue Contingencies: The revenue contingencies assigned to transactions, and their corresponding removal events, determine what revenue is deferred and for how long.

• Revenue Policy: Your revenue policy may trigger the assignment of contingencies to transactions.

• Revenue Contingency Assignment Rules: Your active revenue contingency assignment rules may trigger the assignment of contingencies to transactions.

• Revenue Scheduling Rules: If a revenue scheduling rule is assigned to the transaction, then revenue is recognized according to the revenue scheduling rule details and rule start date.

How Event-Based Revenue Management Is Calculated

The event-based revenue management process for deferring and later recognizing revenue on transactions follows these steps:

1. Receivables evaluates a transaction either entered manually or imported using AutoInvoice for revenue recognition.

2. If one or more contingencies exist, Receivables defers the corresponding revenue to an unearned revenue account and records the reason for the deferral.

3. Receivables monitors the contingencies until an event occurs that can remove the contingency and trigger revenue recognition.

4. When a removal event occurs, Receivables recognizes the appropriate amount of unearned revenue on the transaction.

   The revenue is recognized either according to the revenue scheduling rule or the last contingency removal date.