How Multiple Contingencies Are Processed
If multiple contingencies exist on multiple invoice lines, then revenue recognition can occur at different times for different lines on the invoice. If multiple contingencies exist on a single invoice line, then revenue recognition for that line occurs only after the latest contingency expires.
Settings That Affect Invoices with Multiple Contingencies
A single invoice or invoice line can contain both payment-based contingencies and time-based contingencies:
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Payment-based contingencies: Receivables recognizes revenue on the invoice line or portion of the invoice line when payment is received.
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Time-based contingencies: Receivables recognizes revenue only when the contingency expires.
If no unexpired contingencies remain on the invoice line, Receivables initiates revenue recognition according to the initially assigned revenue scheduling rule. If other unexpired contingencies remain on the invoice line, Receivables doesn't initiate revenue recognition for the invoice line.
How Multiple Contingencies Are Calculated
Multiple contingencies are calculated differently for each of these circumstances:
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Two time-based contingencies on the same invoice.
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Two time-based contingencies on the same invoice line.
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Payment-based and time-based contingencies on the same invoice.
Two time-based contingencies on the same invoice
You enter a customer invoice with 6 lines. Lines 2 and 3 are associated with a fiscal funding clause (60 days) and Line 5 is associated with a cancellation provision (90 days). Revenue for Lines 1, 4, and 6 are fully recognized, either immediately or according to the existing revenue scheduling rules.
After 60 days, the fiscal funding clause on Lines 2 and 3 expires. Receivables initiates revenue recognition in full for Lines 2 and 3.
After another 30 days, the cancellation provision on Line 5 expires. Receivables initiates revenue recognition in full for Line 5.
Two time-based contingencies on the same invoice line
You enter or import an invoice for a creditworthy customer, and one of the invoice lines is associated with both a nonstandard refund policy (50 days) and an acceptance clause (120 days).
Receivables doesn't recognize revenue on this invoice line until the acceptance clause expires after 120 days. If, for example, you obtain written acceptance from the customer after 80 days, you can record early acceptance to allow revenue recognition.
Payment-based and time-based contingencies on the same invoice
You import a customer invoice with 2 lines. Line 1 is $150 and Line 2 is $1,000. Line 2 is associated with an acceptance clause (60 days) and a cancellation provision (150 days). In addition, the customer has been granted extended payment terms on this invoice. Due to the existing contingencies, Receivables can't recognize revenue for either line on this invoice.
After 45 days, you apply a $500 receipt against the invoice. Because this is a partial payment, Receivables prorates this payment across the two invoice lines, based on the weighted average formula:
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Receivables recognizes revenue for Line 1 in the amount of $65.21.
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Receivables can't recognize revenue for Line 2 because of the acceptance clause and cancellation provision. Receivables instead assigns $434.79 for Line 2 as an amount pending revenue recognition.
After 60 days, the acceptance clause on Line 2 expires. However, Receivables can't recognize the $434.79 still pending because of the cancellation provision.
After 75 days, you apply a $650 receipt against the invoice:
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Receivables recognizes the remaining $84.79 in revenue for Line 1.
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Receivables still can't recognize revenue for Line 2 because of the acceptance clause and cancellation provision. Receivables assigns another $565.21 for Line 2 as an amount pending revenue recognition. The total amount for Line 2 now pending revenue recognition is $1,000.
After 150 days, the acceptance clause on Line 2 expires, and Receivables recognizes the entire $1,000 in revenue for Line 2.