Revenue Recognition Rule Field Reference
Revenue recognition rules define how revenue recognition plans are generated when an item is sold. Review the following descriptions of the fields that you use in revenue recognition rules before you begin to define them:
These fields are on the Revenue Recognition Rule page at Revenue > Non-Transaction Revenue Recognition Records > View Revenue Recognition Rules > New.
For the steps to create each revenue recognition rule, see Defining a Revenue Recognition Rule.
Recognition Methods
The following straight-line revenue recognition methods are available:
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Straight-line, by even periods – Recognizes revenue evenly for each period. Amounts are not prorated based on the number of days in any period. All periods recognize equal amounts.
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Straight-line, prorate first & last period – Recognizes equal amounts for periods other than the first and the final period. The number of days in each period is irrelevant. Amounts are prorated for the first period and the final period based on the number of days in each period.
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Straight-line, using exact days – Recognizes revenue amounts individually for each period based on the number of days in each period. Because each day in the term recognizes an equal amount, each period may recognize a different amount.
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Straight-line, prorate first & last period (period-rate) – Determines the total number of periods in the revenue plan. Partial first and last periods count as one period with the amounts prorated based on the number of days. An even amount is allocated to all other periods.
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Custom – Enables you to define revenue recognition terms that include uneven periods and amounts.
When you select Custom for the Method, you define revenue recognition terms by entering information in the columns in the lower portion of the page. A rule using the custom method must have at least one line.
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Period Offset – Represents the number of periods from the start date of the revenue recognition plan to postpone revenue recognition for this line. Only integers are valid, but you may leave the field empty. When the field is blank, NetSuite assumes the offset is zero offset. No offset means revenue for the line is recognized in the revenue recognition start date period.
For example, enter a 2 in this field to wait 2 periods from the revenue recognition start date before you recognize revenue for this line.
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Amount Percentage – The revenue amount to recognize as a percentage. The percent sign is added automatically when you add the row. The total of the lines must equal 100%.
The read-only # column numbers the lines as you add them. These numbers are not displayed in view mode.
The Name, Recognition Method, Amount Source, and Rev Rec Start Date Source Fields in the upper portion of the page are required. Other fields are unavailable except the optional fields Reforecast Method and Inactive.
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Amount Sources
The amount for a revenue recognition plan can be derived from a fixed amount or a percentage. All revenue recognition rule amount source options are event based, and the event is the creation of the revenue recognition plan. The Create Revenue Plans On field on the Revenue Recognition/Amortization subtab of the item record determines when the plan is created.
Forecast revenue recognition plans always use the Revenue Amount for the revenue element as the plan amount.
Some combinations of Amount Source and Create Revenue Plans On values are invalid, and plans are not created for those combinations. When the combinations are invalid, an error message is logged in the Revenue Arrangement Message subtab for the revenue element. A link to the error message is included in the Revenue Recognition Errors portlet on the Revenue page. Valid combinations are shown in the following table:
|
Amount Source |
Create Revenue Plans On |
Amount in Plan |
|---|---|---|
|
Event-Percent based on amount |
Billing Revenue Arrangement Creation Subscription Events |
Percentage of the revenue element line revenue amount that the invoice amount represents in relationship to the discounted sales price. That is: invoice amount ÷ discounted sales amount × revenue amount = amount in plan |
|
Event-Percent based on quantity |
Fulfillment |
Percentage of the revenue element line quantity that is fulfilled multiplied by the revenue amount |
|
Event-Percent Complete |
Project Progress |
Percent complete from the project record multiplied by the revenue amount. When you select this option, other fields on the rule become read-only. For more information, see Advanced Revenue Management (Essentials) for Projects. |
NetSuite supports combinations that are not listed, but they may produce unexpected results. Be sure to follow the listed combinations.
Rev Rec Start Date Sources
This field on the revenue recognition rule determines the source of the initial revenue recognition start date on the revenue recognition plan. The actual start date can be changed in the plan if revenue has not yet been recognized. The options are:
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Arrangement Transaction Date – The date of the revenue arrangement. This is the default. This start date source is appropriate only when the item Create Revenue Plans On value is Revenue Arrangement Creation.
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Event Date – The date of the event that triggers the creation of the revenue recognition plan. The event is determined by the option selected on the item record for the Create Revenue Plans On field. Use this start date source when the item Create Revenue Plan On value is Billing, Fulfillment, or Subscription Events.
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Source Date – The date of the source customer performance obligation that generates the revenue element, for example, the date of a sales order. Forecast revenue recognition plans use the source date as the event date.
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Revenue Element Start Date – The start date on the revenue element record. This date is not generated automatically. When you use this option, a revenue recognition plan cannot be generated until a date is provided. If you use this option, best practice is to use a saved search to identify revenue elements with missing dates. For information, see Searching for Revenue Elements with Missing Dates.
To add the start date:
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Edit the revenue arrangement that the element belongs to.
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In the Revenue Elements subtab, scroll to the Start Date field and select a date for an actual revenue recognition rule.
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For forecast revenue recognition rules, scroll to the Forecast Start Date field and select a date.
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Save the revenue arrangement.
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Subscription Event Start Date – This option is available only when the SuiteBilling feature is enabled. The date the subscription starts becomes the start date for the revenue recognition plan. Do not use this start date with items whose Create Revenue Plans On value is Revenue Arrangement Creation. For more information, see Revenue Recognition Rules for SuiteBilling and Configuring Subscription Items for Revenue Recognition.
Rev Rec End Date Sources and End Date Change Impact
The Rev Rec End Date Source field on the revenue recognition rule determines the source of the default end date on the revenue recognition plan. The actual end date can be changed in the plan. The options are:
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Rev Term in Months – The end date is derived from the revenue recognition plan start date and the value in the Term in Months field. Term in Months is a required field when you select this option. Exact months are used. If the start date is in the middle of the month, the end date is also mid-month. This is the default Rev Rec End Date Source.
For example, your revenue plan has a start date of July 7, 2015. The Rev Rec End Date Source is Rev Term in Months, and the Term in Months is 12. Then, the end date of the plan is July 6, 2016.
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Rev Term in Days – The end date is derived from the revenue recognition plan start date plus the value of the Term in Days field. Term in Days is a required field when you selection this option.
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Arrangement Transaction Date, Event Date, and Source Date – These options recognize revenue immediately when matching Rev Rec Start Date Source values are selected.
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Recognition Period – The end date is derived from the revenue recognition plan start date and the value in the Recognition Period field. When this option is selected, Recognition Period is a required field. The end date in the revenue recognition plan is the last day of the period, and partial periods are included in the count.
For example, your revenue plan has start date of July 7, 2015. The Rev Rec End Date Source is Recognition Period, and the Recognition Period is 12. Then, the end date of the plan is June 30, 2016. The partial initial period is included in the period count.
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Revenue Element End Date – The end date on the revenue element record. This date is not generated automatically. When you use this option, a revenue recognition plan cannot be generated until a date is provided. If you use this option, best practice is to use a saved search to identify revenue elements with missing dates. For information, see Searching for Revenue Elements with Missing Dates.
To add the end date:
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Edit the revenue arrangement that the element belongs to.
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In the Revenue Elements subtab, scroll to the End Date field and select a date for an actual revenue recognition rule.
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For forecast revenue recognition rules, scroll to the Forecast End Date field and select a date.
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Save the revenue arrangement.
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Subscription Event End Date – This option is available only when the SuiteBilling feature is enabled. The date the subscription ends becomes the end date for the revenue recognition plan. Use this option when the Rev Rec Start Date Source is Subscription Event Start Date. For more information, see Revenue Recognition Rules for SuiteBilling.
If the source is an evergreen subscription, there is not an end date, so the Estimated Revenue Recommended End Date Field on the subscription header is used as the end date.
The End Date Change Impact field determines how revenue recognition plans are updated when only the end date changes. If you make other changes simultaneously, the End Date Change Impact rule is ignored. The options are:
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Update Remaining Periods Only – This is the default. The remaining unrecognized revenue is divided by the total number of months or periods remaining.
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Update All Periods – The total revenue is divided by the total number of months or periods. Adjustments to catch up or claw back revenue are made in the current period for previously recognized revenue.
Term in Months
Specify the number of months to include in revenue recognition plans generated from this rule. If the start date is in the middle of the month, the end date is also mid-month. Consequently, a revenue recognition plan may span more periods than the month count. This field is available only when the Rev Rec End Date Source is Rev Term in Months.
For example, your revenue plan has a start date of July 7, 2015. The Rev Rec End Date Source is Rev Term in Months, and the Term in Months is 12. Then, the end date of the plan is July 6, 2016. Revenue is recognized over 13 periods because the partial periods at the beginning and end are both included in a count of the periods.
To override the end date derived from the revenue rule, you can change the value of Term in Months in a revenue element. Both current and future revenue plans are affected by the change when revenue plans are updated. The Rev Rec End Date and Planned Revenues subtab are updated on the revenue plans, but the Term in Months field stays the same.
Term in Days
Specify the number of days to include in revenue recognition plans generated from this rule. The end date of the plan is the Rev Rec Start Date plus the number of days. This field is available only when the Rev Rec End Date Source is Rev Term in Days.
For example, your revenue plan has a start date of June 23. The Rev Rec End Date Source is Rev Term in Days, and the Term in Days is 60. Then, the end date of the plan is August 21. Revenue is recognized in 3 periods due to the partial periods at the beginning and end of the plan.
To override the end date derived from the revenue rule, you can change the value of Term in Days in a revenue element. Both current and future revenue plans are affected by the change when revenue plans are updated. The Rev Rec End Date and Planned Revenues subtab are updated on the revenue plans, but the Term in Days field stays the same.
Recognition Period
Specify the number of periods to include in revenue recognition plans generated from this rule. For example, if you enter 12, then the revenue plan runs for 12 periods from the start date. An initial partial period is included in the period count if applicable. This field is available only when the Rev Rec End Date Source is Recognition Period.
For example, your revenue plan has a start date of July 7, 2015. The Rev Rec End Date Source is Recognition Period, and the Recognition Period is 12. Then, the end date of the plan is June 30, 2016. The partial period initial period is included in the period count.
Period Offset and Start Offset
You can define an offset value for a revenue recognition rule to delay the start of a revenue recognition plan. Two types of offset are available:
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Period Offset – This moves the entire recognition period into the future by the number of periods specified. The total number of periods remains the same.
For example, enter a 2 in this field to wait two periods before you begin recognizing revenue. This can be useful for services you sell that have a probationary or trial period.
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Start Offset – This delays the beginning of revenue recognition, changes the number of periods in the plan, and keeps the same plan end date.
To use a start offset, specify the number of periods to postpone the start of the revenue recognition plan. The number of periods is reduced by the same number because the start is postponed but the end remains the same. You must have at least one more period in the schedule than the number of periods in the start offset.
Initial Amount
The initial amount is a percentage or fixed currency amount to be recognized in the first recognition period. After the initial amount, the plan for recognition of the remainder follows the rules of the selected Recognition Method.
For example, you have contract with a customer to recognize 25% of a $1,200 item immediately. The rule includes the following terms:
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Initial Amount = 25% or $300
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Method = Straight-line, by even periods
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Recognition Period = 12
In the first period, $300 is recognized. The remaining $900 is divided evenly over the remaining 11 periods.
Reforecast Method
The reforecast method determines how future periods are adjusted when revenue forecast plans are recalculated. The option you select for the revenue recognition rule determines the default value on revenue forecast plans that use the rule. If you do not select a reforecast method, revenue forecast plans cannot be recalculated.
You can avoid problems with forecast plan recalculation by selecting a default reforecast method in the accounting preferences. Best practice is to select a default reforecast method even if you have also chosen to disable creation of forecast plans. For information about the accounting preferences Disable Creation of Forecast Plans and Default Reforecast Method, see Setting Advanced Revenue Management (Essentials) Preferences.
The options for Reforecast Method are as follows:
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Next Period – The period following the Recalculate as of Period. The total adjustment is included in this period. The system-generated default revenue recognition rules use this option.
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Remaining Periods – All of the periods from the period after the Recalculate as of Period through the last period of the revenue forecast plan. The total adjustment is distributed evenly across these periods.
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Last Period – Always the last period of the revenue forecast plan, even when the Recalculate as of Period is the last period. The total adjustment is included in this period.
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Manual – When you select this option, you must enter a default value in the Recalculation Adjustment Period Offset field. The total adjustment is included in the period determined by the value of this field. The calculation for the adjustment period is start period plus the recalculation adjustment period offset. The first period of the recalculated revenue forecast plan is 0. You can edit the offset in forecast plans that use this reforecast method. The value may not be a negative number. If offset period causes the forecast plan to extend beyond the available accounting periods, you receive an error when you recalculate the revenue forecast plans.
For example, consider a revenue element with a revenue amount of $300. It has an actual revenue recognition plan with a start date of January 1 and an end date of April 30 in the same year. The revenue forecast plan starts January 1 and ends March 31. Both plans use the straight-line, by even periods recognition method. The plans are created on revenue arrangement creation as follows:
Revenue Plan Type
Jan
Feb
Mar
Apr
Total
Actual
75
75
75
75
300
Forecast
100
100
100
300
The following table shows the recalculated revenue forecast plans using the manual option for the reforecast method with different recalculation adjustment period offset values:
Recalculation Adjustment Period Offset
Jan
Feb
Mar
Apr
May
Total
0
75 + 25 = 100
100
100
300
1
75
100 + 25 = 125
100
300
2
75
100
100 + 25 = 125
300
3
75
100
100
25
300
4
75
100
100
25
300
Accounting preferences include a Default Reforecast Method, which you can use to set a default value for all revenue rules. For more information, see Setting Advanced Revenue Management (Essentials) Preferences.
For more information, see Recalculating Revenue Forecast Plans.