Calculations for Revenue Plans Created on Subscription Events
This topic describes what happens when you clear the Create Revenue Elements for Subscription Revisions accounting preference. When you check the preference, the preferred value of the Create Revenue Plans On field, for all subscription items except usage items, is Revenue Arrangement Creation. For instructions on setting the preference and details about the checked preference, see Setting the Optional Accounting Preference for Advanced Revenue Management.
After you set the Create Revenue Elements for Subscription Revisions preference, you cannot change it.
The preferred value for the Create Revenue Plans On field on item records for Recurring – Adjustable, Usage, and Commit Plus Overage subscription line types is Subscription Events. When a subscription event initiates creating a revenue recognition plan, the forecast revenue plan uses the full revenue amount. However, actual revenue plans are aggregated from a series of virtual plans that use the subscription event amount. Recognition methods for the virtual actual plans treat the charge period as the period.
You can use the virtual plans to set your own dates when the subscription quantity or pricing changes. The revenue recognition plan can pick up any changes in virtual plans from the period in which they occur, rather than recalculating the entire subscription term. Individual subscription charges, start dates, and end dates for virtual plans align with the lines on the Charges subtab of the Billing Account page.
Due to differences in dates and amounts, the forecast and actual revenue plans may differ from each other at the line level. The following examples show the calculations for actual and forecast revenue plans created on subscription events for two revenue recognition methods.
For information and examples of all recognition methods, see Straight-Line Revenue Recognition Examples in Advanced Revenue Management (Essentials). The examples share the following values:
-
Subscription term – 6 months, April 9 – October 8
-
Monthly charge – $100
-
Total revenue amount – $600
-
Billing date – the ninth day of each month, April – September
Straight-Line, by Even Periods Method
This method divides the revenue amount evenly across all periods. Currency amounts are not prorated based on the number of days in any period. The virtual actual plans treat the charge period as the period.
The forecast plan has seven periods and a revenue amount of $600. The last period includes the amount needed to correct rounding the previous periods.
The virtual plans have a revenue amount of $100. The monthly charge amount is divided equally between the two periods shown as A and B in the following table. The actual revenue plan line is the sum of the calculations for:
-
The days after and including the billing date (B)
-
The days before the billing date (A)
|
Period |
Billing Date |
Charge |
Forecast Plan |
Virtual Plan A |
Virtual Plan B |
Actual Plan A + B = |
|---|---|---|---|---|---|---|
|
Apr |
Apr 9 |
100.00 |
85.71 |
|
50.00 = Charge a ÷ 2 |
50.00 |
|
May |
May 9 |
100.00 |
85.71 |
50.00 = Charge a ÷ 2 |
50.00 = Charge b ÷ 2 |
100.00 |
|
Jun |
Jun 9 |
100.00 |
85.71 |
50.00 = Charge b ÷ 2 |
50.00 = Charge c ÷ 2 |
100.00 |
|
Jul |
Jul 9 |
100.00 |
85.71 |
50.00 = Charge c ÷ 2 |
50.00 = Charge d ÷ 2 |
100.00 |
|
Aug |
Aug 9 |
100.00 |
85.71 |
50.00 = Charge d ÷ 2 |
50.00 = Charge e ÷ 2 |
100.00 |
|
Sep |
Sep 9 |
100.00 |
85.71 |
50.00 = Charge e ÷ 2 |
50.00 = Charge f ÷ 2 |
100.00 |
|
Oct |
|
|
85.74 |
50.00 = Charge f ÷ 2 |
|
50.00 |
|
Total |
|
600.00 |
600.00 |
|
|
600.00 |
Straight-Line, Prorate First & Last Period Method
This method recognizes revenue in equal amounts for all periods except the first and final periods, regardless of the number of days in those periods. Currency amounts are prorated for the first period and the final period based on the number of days in those periods, divided by the total number of days from the revenue recognition start and end dates, inclusive. The virtual actual plans treat the charge period as the period.
The forecast plan has 183 days and a revenue amount of $600. The last full period includes the amount needed to correct rounding of the previous periods.
For the actual plan, each service period extends over parts of two months, so each is prorated by the number of days in the month. The actual revenue plan line is the sum of the calculations for the days:
-
After and including the billing date (B)
-
Before the billing date (A)
|
Period |
Billing Date |
Charge |
Forecast Plan |
Virtual Plan A |
Virtual Plan B |
Actual Plan A + B = |
|---|---|---|---|---|---|---|
|
Apr |
Apr 9 |
100.00 |
72.13 = 600 ÷ 183 × 22 |
|
73.33 = charge a ÷ 30 × 22 |
73.33 |
|
May |
May 9 |
100.00 |
100.33 = (600 – 72.13 + 26.23) ÷ 5 |
26.67 = charge a – 73.33 |
74.19 = charge b ÷ 31 × 23 |
100.86 |
|
Jun |
Jun 9 |
100.00 |
100.33 = (600 – 72.13 + 26.23 ) ÷ 5 |
25.81 = charge b – 74.19 |
73.33 = charge c ÷ 30 × 22 |
99.14 |
|
Jul |
Jul 9 |
100.00 |
100.33 = (600 – 72.13 + 26.23 ) ÷ 5 |
26.67 = charge c – 73.33 |
74.19 = charge d ÷ 31 × 23 |
100.86 |
|
Aug |
Aug 9 |
100.00 |
100.33 = (600 – 72.13 + 26.23 ) ÷ 5 |
25.81 = charge d – 74.19 |
74.19 = charge e ÷ 31 × 23 |
100.00 |
|
Sep |
Sep 9 |
100.00 |
100.32 = (600 – 72.13 + 26.23 ) ÷ 5 |
25.81 = charge e – 74.19 |
73.33 = charge f ÷ 30 × 22 |
99.14 |
|
Oct |
|
|
26.23 = 600 ÷ 183 × 8 |
26.67 = charge f – 73.33 |
|
26.67 |
|
Total |
|
600.00 |
600.00 |
|
|
600.00 |