Prospective Accounting Treatment for Immaterial Price Changes of Subscription Products

Use a prospective accounting treatment to reflect minor unit selling price changes for subscription products imported from Oracle Subscription Management.

While performing price adjustments for a particular period of a subscription's recurring charge in Oracle Subscription Management, you can choose the prospective accounting option. When this option is selected, Subscription Management:

• Sends a revision line with the revised plan end date (the date until which the initial selling price is applicable).
• Sends a new line with the new unit selling price and the start and end dates that the new price is in effect.
• Sends a second new line with the initial selling price for the remainder of the subscription.

For example, you have customer contract with one subscription from 01-Jan-2023 to 31-Dec-2023 at a selling price of 100 USD per month which is 1200 USD for the entire year. For an immaterial price decrease of 5 USD performed for March 2023, Subscription Management will:

• Revise the initial revenue line with line amount of 200 USD and end date as 28-Feb-2023.

• Send a new revenue line for March 2023 for the same item with unit selling price of 95 USD, line amount of 95 USD, start date as 01-Mar-2023 and end date as 31-Mar-2023.

• Send another new revenue line for the rest of the subscription period with unit selling price of 100 USD, line amount of 900 USD, start date as 01-Apr-2023 and end date as 31-Dec-2023.

Because the price change is set to initiate prospective accounting, after processing these lines, Revenue Management performs prospective accounting on the customer contract where the transaction price is reallocated only from the contract revision date. Revenue recognized before the contract revision date remains intact.

You can also choose the prospective accounting option in Subscription Management while performing the following actions:

• Close
  • Close action terminates a subscription.
  • Subscription Management sends a revision line revising the plan end date. Revenue recognized until the termination date remains intact and the remaining transaction price on the customer contract in Revenue Management is reallocated among the open performance obligations.

• Amend
  • Amend implies closing a subscription and creating a new subscription.
  • Based on your setup, Subscription Management either sends the new subscription as a new revenue line, which is created as a new customer contract in Revenue Management; or sends the new subscription to be added to the existing customer contract. Revenue Management performs prospective accounting by reallocating the new transaction price from the contract revision date among the new and open performance obligations.

• Suspend
  • Subscription Management sends a revision line revising the plan end date. Revenue recognized until the suspension date remains intact and the remaining transaction price on the customer contract in Revenue Management is reallocated among the open performance obligations.

• Renewal
  • Upon renewal, Subscription Management creates new subscription upon renewal. Based on your setup, Subscription Management either sends the new subscription as a new revenue line, which is created as a new customer contract in Revenue Management; or sends the new subscription to be added to the existing customer contract.  Revenue Management performs prospective accounting by reallocating the new transaction price from the contract revision date among the new and open performance obligations.

• Rate adjustment of Pricing Term
  • Whenever there is a change in the rate adjustment, Subscription Management sends a revision line for that pricing term with the new unit selling price.  Revenue Management performs prospective accounting by reallocating the new transaction price among the open performance obligations from the contract revision date.  Revenue recognized until a day before the contract revision date remains intact.

When processing immaterial price changes that do not significantly alter the initial terms and the net consideration of the contract such as price changes due to indexation, you can choose the prospective accounting treatment. The impact on the price change impacts only current and future periods. This allows you to record the price changes without having to restate any previously recognized revenue.

Steps to Enable

You don't need to do anything to enable this feature.

Tips And Considerations

• Subscription Management lets you choose the prospective accounting option only for recurring charges.  Price revisions of one-time and usage charges are always sent using the retrospective accounting option.

• Prospective accounting is supported only when the satisfaction plan is Daily rates partial periods. Because the satisfaction plan is defaulted from the Manage Source Document Types page, you must set the default value of the satisfaction plan to Daily rates partial periods for the source document type Subscription Management.

• Any revisions performed on a one-time charge trigger retrospective accounting on the customer contract.

• A new one-time charge added to an existing contract triggers retrospective accounting on the customer contract.

• If any of the revenue lines with a satisfaction measurement model of Quantity or Percent are not fully satisfied in the contract, it always triggers retrospective accounting on the customer contract.

• If you perform a backdated price adjustment on a customer contract on which prospective accounting was previously performed, the backdated price adjustment triggers retrospective accounting on the customer contract.

Key Resources

• Prospective Accounting for Immaterial Price Changes in Subscription Products
• Guidelines for Using Prospective Accounting with Subscription Products

Access Requirements

No new role access is needed to use this feature.