Advanced Cost Amortization

When you check the accounting preference Enable Advanced Cost Amortization, you can accrue and amortize eligible sales costs associated with a contract. You record the eligible sales costs on the revenue arrangement and revenue elements in the base currency. When you save the revenue arrangement, a deferred cost journal entry is automatically created to accrue the costs. The amortization of these costs is tracked on the revenue recognition plan in a subtab called Cost Amortization Plan. A deferred expense rollforward report is available. For information, see Deferred Expense Rollforward Report.

Three types of eligible sales costs can be accrued and amortized. You must designate expense and deferred expense accounts for each type of cost.

Cost Type

Location of Account Settings

Where to Record Costs

Direct contract acquisition costs including all direct expenses incurred during the sales process for a revenue contract obligation, such as sales commissions and marketing expenses

Contract Acquisition Expense Account, Contract Acquisition Expense Source Account, and Contract Acquisition Deferred Expense Account fields on the revenue arrangement header. You can set the defaults for these accounts on the Accounting Preferences page (Setup > Accounting > Accounting Preferences)

Contract Acquisition Cost Amount (Base Currency) field on the revenue arrangement header

Item-specific resale expenses for items that are not inventory items

Deferred Expense Account and Expense Account in the Accounting subtab of the item record

Item Resale Cost Amount (Base Currency) field on the revenue element

Implementation labor expense

Labor Expense Account and Labor Deferred Expense Account fields on the revenue element

Item Labor Cost Amount (Base Currency) field on the revenue element

For detailed information about the components of advanced cost amortization, see the following topics:

Related Topics

General Notices