Unbilled Receivable Adjustment Sub-Arrangement Grouping Example

When you select Sub-Arrangement Group for the account preference, the unbilled receivable adjustment is calculated for a group of revenue elements in an arrangement. The group is identified by the value of the Unbilled Receivable Group field on the revenue element. Revenue elements within the arrangement that have the same unbilled receivable group value are calculated together. A net amount ratio determines the portion of the group’s contract asset to apply to each revenue element’s deferred revenue account. See Net Amount Ratio.

The group concept is limited to the revenue arrangement. If you have revenue elements on two different arrangements that share the same group ID, they are not calculated together for the unbilled receivable adjustment. When you merge revenue arrangements, the unbilled receivable group values on the individual elements are carried to the new arrangement. All revenue elements in the new arrangement that have the same group ID are calculated together.

For example, assume you have the following two revenue arrangements:

Arrangement	Element	Unbilled Receivable Group	Revenue Recognized	Effective Billing	Element Asset	Element Liability	Net Asset or Liability
A	A1	X	100	50	50	—	50
A	A2	X	10	50	—	40	–40
A	A3	X	50	45	5	—	5
B	B1	X	10	5	5	—	5
B	B2	Z	20	10	10	—	10
B	B3	Z	35	40	—	5	–5

The unbilled receivable adjustments for the individual revenue arrangements are calculated as follows:

All elements in arrangement A are included in sub-arrangement group X.

The net unbilled receivable adjustment for group X is $15. This amount is the sum of the amounts in the Net Asset/Liability column for the arrangement and group combination. The amount is debited to the unbilled receivable account. Amounts are credited to the deferred revenue accounts for elements A1 and A3 according to their net amount ratios. The total element asset amount for group X is $55, and the net amount ratios are 0.909 and 0.091, respectively.
Element B1 is adjusted alone. Although its sub-arrangement group is X, it is not in the same revenue arrangement.

The net unbilled receivable adjustment for this element is $5 debited to unbilled receivable and credited to the deferred revenue account for element B1.
Elements B2 and B3 are included in sub-arrangement group Z.

The net unbilled receivable adjustment for this group is $5. This amount, the sum of the amounts in the Net Asset/Liability column for the arrangement and group combination, is debited to the unbilled receivable account. The credit goes to the deferred revenue account for element B2 because 100% of the total element asset for group Z is from this element.

Revenue arrangements A and B have the same customer and can be merged to a new arrangement C. Assuming the values are the same for the elements in the new arrangement, the unbilled receivable adjustment after the merge would be calculated as follows:

Elements CA1, CA2, CA3, and CB1 are all included in sub-arrangement group X because they belong to the same arrangement.

The prior posting based on group X in arrangement A is reversed. The prior posting for CB1 is also reversed. The net unbilled receivable adjustment for group X from the column Net Asset/Liability is $20. Amounts are credited to the deferred revenue accounts for elements CA1, CA3, and CB1 according to their net amount ratios. The total element asset amount for group X in arrangement C is $60, and the net amount ratios are 0.833, 0.083, and 0.083, respectively. A required adjustment for rounding is applied to the last line, element CB1.
Element CB2 and CB3 still belong to group Z.

The prior posting is reversed, and a new unbilled receivable adjustment is created with the same values as the previous adjustment.

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