Reclassification of Deferred Revenue
Run the reclassification journal entry process to reclassify deferred revenue for revenue arrangements after you post month-end revenue recognition journal entries. You must create deferred revenue reclassification journal entries each month to ensure accurate results in subsequent periods. For information about the required permissions, see Month-End Revenue Processing.
You can set up both revenue recognition journal entries and reclassification journal entries to run at scheduled times. For information, see Scheduling Revenue Recognition Journal Entries and Scheduling Reclassification Journal Entries.
Reclassification is cumulative, but the process runs only for arrangements that are marked as eligible in the selected posting period. A revenue arrangement must be compliant to be eligible for reclassification.
Arrangements are eligible for reclassification in the period that the following transactions are created or resaved:
-
Invoice or credit memo, cash sale or refund
-
Revenue arrangement
-
Revenue recognition journal entry
When you create reclassification journal entries, you receive a warning if the current or prior periods have unapproved invoices or credit memos. The reclassification process excludes any unapproved invoices and credit memos.
The reclassification process isolates revenue arrangements that fail a step from further processing. Processing continues for the remaining revenue arrangements through journal entry creation. At the end of the reclassification process, the Complete link on the status page opens the Processed Reclassification Journal Entries page. This page lists the completed journal entries. The Errors link on the status page opens a page that lists the revenue arrangements that failed. Failed revenue arrangements are available to resubmit.
To run reclassification in a reopened period, you must revert any prospective merges to unlock the locked revenue arrangements.
Best Practices for Deferred Revenue Reclassification
Adhere to the following guidelines to ensure accurate results:
-
If you use SuiteScript or SuiteFlow for journal entry approval routing, create a custom form for your system-generated reclassification journal entries. Then, exclude the custom form from your workflows. Select the custom form in the accounting preference Default Reclassification Journal Entry Form. Journal entry approval routing is not supported for standard system-generated journal entries.
-
If the accounting preference Require Approvals on Journal Entries is checked, ensure that all journal entries related to revenue recognition are approved prior to reclassification. (This accounting preference does not rely on workflows.) If revenue recognition journal entries and prior period reclassification journal entries are not approved in advance, the reclassification adjustments will be incorrect. You can correct the adjustments by running reclassification again after all revenue recognition journal entries are approved.
-
If you use the Automated Intercompany Management feature, be sure to check Eliminate Intercompany Transactions for all deferred revenue accounts used for reclassification.
-
Avoid custom workflows that edit the system-generated reclassification journal entries. These journal entries post in the subsidiary base currency. NetSuite permits these system-generated journal entries to link to foreign currency customers. However, you cannot link foreign currency customers to journal entries in the user interface unless the customer also uses the base currency. If a custom workflow edits the record, the system treats that edit like an edit in the user interface. Consequently, foreign customers may be dropped from the journal entry.
For detailed information about deferred revenue reclassification, see the following topics: