Creating a Prospective Merge
Prospective merge management uses the residual values of the merged revenue arrangements to represent the modified performance obligation. The process terminates the original revenue arrangements and creates a new arrangement with the residual values as of the effective date.
The effective date of a prospective merge is the first day of the first open period that is not an adjustment period. You cannot create a prospective merge if revenue recognition or reclassification journal entries have already been posted after the effective date. If you have prior changes that have not posted, reopen the prior period and post the updates before you create the prospective merge.
To create a prospective merge:
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Go to Revenue > Revenue Arrangements > Merge Revenue Arrangements for Linked Sources to open the Merge Revenue Arrangements for Linked Sources page.
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In the Primary Options and Criteria area, do the following:
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Select a Customer from the list.
When you select the Customer, the other fields are populated as follows:
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Subsidiary – The customer’s subsidiary is automatically selected. Unless the customer is associated with multiple subsidiaries, you cannot change the Subsidiary without first changing the Customer.
If the customer is associated with multiple subsidiaries, the primary subsidiary is the default. The Customer and Subsidiary must be the same for all revenue elements and revenue arrangements included in the prospective merge.
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Currency – By default, this is the primary currency for the Customer. You can select a different currency for multi-currency customers.
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Accounting Book – This field is available only when Multi-Book Accounting is enabled. The default value is Primary Accounting Book.
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If you use approval routing for revenue arrangements, check or clear the Approved filter.
When the Approved box is checked, only approved revenue arrangements appear in the list of available arrangements. When the box is cleared, approved revenue arrangement are not listed. For information about approvals, see Revenue Arrangement Approval Routing.
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Select values for the Date From and Date To fields in accordance with your company’s policies for linking orders.
When the Enable Advanced Cost Amortization accounting preference is checked, you can also filter by Contract Acquisition Expense Account and Contract Acquisition Deferred Expense Account.
When these fields are blank, all revenue arrangements that match the other criteria are listed. Matching constraints apply to the merge if the revenue arrangements you select include a Contract Acquisition Cost Amount and revenue plans have been created. The Contract Acquisition Cost Account and Contract Acquisition Deferred Expense Account must match for all revenue arrangements and elements in the merge. For more information, see Contract Acquisition Cost Allocation.
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Check Only Merge Residual Revenue Amounts.
The read-only Change Order Effective Date field is populated with the first day of the first open period that is not an adjustment period.
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Check or clear the Recalculate Residual Fair Value box as needed:
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If you want the fair value for revenue elements to be recalculated for the new revenue arrangement, check this box. Before you check this box, you should ensure that all the fair values to be calculated include the quantity field. For more information, see Fair Value Setup.
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To keep the fair value of the revenue elements equal to the original calculated fair value amount × (1 – residual ratio), clear this box.
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Note:The Recalculate Residual Fair Value box appears only when the Advanced Revenue Management (Revenue Allocation) feature is enabled. For information about enabling this feature, see Enabling the Advanced Revenue Management (Revenue Allocation) Feature.
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In the Settings for New Revenue Arrangement area, select the following:
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Revenue Arrangement Date – Enter or select a date for the Date on the new revenue arrangement. The default is the current date.
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Contract Cost Accrual Date – Enter or select a date for the Contract Cost Accrual Date on the new revenue arrangement. The default is the current date. This field appears only when the Enable Advanced Cost Amortization accounting preference is checked.
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If desired, click Mark All at the top of the page to select all the revenue arrangements listed.
Note:If your company permits posting discounts on sales transactions, identify revenue arrangements associated with such transactions and do not select them for merge. For information, see Discount and Markup Items in Advanced Revenue Management (Essentials).
Alternatively, check the Select box for individual revenue arrangements. When you select an arrangement, all its elements are automatically selected.
You cannot create a prospective merge if any of the revenue elements in the revenue arrangements that you are merging requires revenue recognition plan updates. Suppose the Requires Revenue Plan Update column value is Yes for any of the revenue elements in a revenue arrangement. In that case, the revenue element boxes are disabled because the revenue recognition plans are not up to date. For information about updating revenue recognition plans, see Updating Revenue Recognition Plans.
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Click Preview to open the Preview Revenue Arrangement page.
This page is read-only. It displays the updated Transaction Total, Total Carve-Out, and Total Revenue Amount for the proposed new revenue arrangement. For each revenue element, the preview includes the calculated fair value and revenue amounts before and after the merge plus the change. The Total Carve Out, Calculated Fair Value Amount Before, and the Calculated Fair Value Amount After fields appear only when the Advanced Revenue Management (Revenue Allocation) feature is enabled. Other key fields for the revenue elements are also displayed with links for Revenue Element, Source, and Item.
When the Enable Advanced Cost Amortization accounting preference is checked, the preview includes before, after, and change columns for the three types of amortized costs.
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Click Merge to proceed or Cancel to return to the Merge Revenue Arrangements for Linked Sources page.
You can click Merge on the Merge Revenue Arrangements for Linked Sources page without first viewing the preview, but it is not recommended.
After you click Merge, the new prospective merge is displayed when the process is complete.
If there is a delay in processing, the Process Status page opens. If that happens, click Refresh until the Submission Status displays Complete.