Modifications to Invoices with Deferred Revenue

You can modify invoice lines that have deferred revenue or revenue contingencies.

You can make these modifications:

• Adjust revenue

• Adjust invoices

• Modify distributions and sales credits

• Credit invoices

• Reverse receipts

Each activity has a different effect on active revenue contingencies.

Note: You can't set an invoice with active revenue contingencies to Incomplete.

Adjust Revenue

When you move revenue on an invoice line from an unearned to an earned revenue account, or earned to unearned, this action removes the invoice line revenue contingencies. The invoice is no longer subject to automatic revenue recognition.

This doesn't apply to adjustments to sales credits, because you can only adjust sales credits on revenue that has already been scheduled.

Adjust Invoices

You can manually adjust an invoice with revenue contingencies. However, if the GL Account Source for the specified adjustment activity is Revenue on Invoice, then Receivables removes the contingency from the invoice after making the adjustment. This is because AutoAccounting derives the anticipated revenue accounting distribution accounts and amounts, thereby overriding the event-based revenue management process.

If you want Receivables to continue monitoring an invoice for automatic revenue recognition, then always use a credit memo to adjust an invoice with contingencies.

Modify Distributions and Sales Credits

You can manually change the accounting distributions and sales credits on an invoice with contingencies.

Receivables removes the contingencies from the invoice for these types of changes:

• For distributions, you change an existing accounting distribution to a revenue or any other account.

• For sales credits, you rerun AutoAccounting when you modify sales credits.

Credit Invoices

If you issue a credit memo against an invoice that had revenue automatically deferred upon import, then the impact of the credit memo on the invoice differs depending on the original reason for the revenue deferral. This applies only if you set the Invoice Accounting Used for Credit Memos profile option to Yes.

For example, you apply a credit memo against an invoice that had revenue deferred due to one or more contingencies, but some of the revenue was partially recognized. A portion of the invoice revenue, therefore, is still in an unearned revenue account. Different procedures apply depending on whether the contingencies are payment-based or time-based:

• Payment-based contingencies: If revenue on this invoice was deferred due to unmet payment-based contingencies, then Receivables always debits the unearned revenue account for the full amount of the credit memo, according to the initially assigned revenue scheduling rules.

  Caution: This is a departure from standard functionality. When you credit an invoice that isn't under evaluation for event-based revenue management, Receivables prorates the amount of the credit memo between the earned and unearned revenue invoice amounts.

  If the amount of the credit memo exceeds the amount of the unearned revenue on the invoice, and the credit memo transaction type allows overapplication, then Receivables records the excess amount as a debit to the unearned revenue account. You can optionally clear the negative unearned revenue on this invoice.

• Time-based contingencies: If revenue on this invoice was deferred due to unexpired time-based contingencies, then Receivables always prorates the credit memo amount between the earned and unearned revenue amounts on the invoice. If a multi-period revenue scheduling rule exists on an invoice, then Receivables further prorates the credit memo amount across future periods.

If you apply a credit memo against an invoice with revenue that was already manually adjusted, then Receivables follows standard credit memo functionality. Receivables prorates the credit memo amount between the earned and unearned revenue amounts on the invoice, even if the invoice was initially analyzed for collectibility and acceptance. In this case, you must confirm that the earned and unearned revenue on the invoice is stated appropriately for each period. If necessary, use the Manage Revenue Adjustments pages to make any further adjustments.

Reverse Receipts

If you apply a receipt to an invoice with revenue contingencies, and you later reverse the receipt, the impact of the receipt reversal differs depending on the original reason for the revenue deferral.

Different procedures apply depending on whether the contingencies are payment-based or time-based:

• Payment-based contingencies: If you apply a receipt to an invoice with a payment-based contingency, Receivables initiates revenue recognition for the applied amount. If you later reverse the receipt, Receivables automatically unearns the previously earned revenue.

• Time-based contingencies: If you apply a receipt against an invoice line with an unexpired time-based contingency, Receivables leaves the receipt amount as unearned revenue, but marks the amount as pending revenue recognition when the contingency expires. If you later reverse the receipt, then Receivables reflects the receipt reversal by simply removing the pending status from the receipt amount.

  If revenue on an invoice was deferred due to unexpired time-based contingencies only, then the reversal of a receipt doesn't impact the amount and timing of revenue recognition. For example, if all lines of an invoice are associated with a nonstandard refund policy (90 days), Receivables recognizes revenue only upon the expiration of the 90-day period. Applying and later reversing a receipt against this invoice has no impact on the timing and amount of revenue recognition.