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Revenue Recognition for Deferred Revenue


We are using lease out process in REFX module to manage lease related contracts. I am facing an issue with RERAALCN output. I would elaborate my requirement with an example. We have a lease contract for lease rental is booked in REFX in advance for 3 years and all revenue is credited to a deferred revenue account. Now from the amount posted to this deferred revenue amount we want to recognize revenue every month using Accruals/Deferrals feature in REFX. I have set up customizing as per OSS 829676 , relevant flow types have been assigned accruals/deferral types. When i am running first posting system is picking exactly same which it should for the first month revenue recognition but when RERAALCN is executed in second month system reversed the entry posted in previous month and do not recognize anything from that month.. I do not want entry to be reversed , i need monthly amortization of deferred revenue posted earlier. Accrual type which is called is ANRVCN. Furthermore in second month system wants to post an inception entry  with type TRRVCN which i do not need, i know it can be avoided by setting up only periodic posting for this accrual type but this setting would deviate from the what the settings have been described in OSS note. Please guide me how to accomplish the task. I am attaching screen shot of what is actually going wrong.


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2 Answers

  • Best Answer
    Oct 26, 2015 at 06:18 PM

    Hi Atif,

    I am pasting important configuration steps which I have set up for 1 condition (100, Flow type Z100). Compare your configuration and make necessary changes. For me it's working perfectly fine.

    Run periodic posting followed by RERAALCN. From next month only RERAALCN.



    Part 1.png (543.2 kB)
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    • Hi Amare:

      Sorry for being late with the reply. Actually we are following a different pattern of entries. I will give you an example as under

      Scenario: Contract term is for 2 years with payment form as Advance in Frequency, 1st year rent is 12000 AED per month, 2nd Year 24000 AED PM So, in this case, your SL rent will be 1500 AED pm.

      Posting Frequency is 6 so customer receivables will generated for every 6 months. We have following accounts

      Unearned Revenue-Current (B/S)

      Unearned Revenue-Non CurrentĀ  (B/S)

      IAS Clearing A/C B/S

      Revenue (P&L)

      For a contracting starting 01.10.2015 and ending 30.09.2017 with above termsĀ  when periodic posting is done following entries gets posted

      Customer Dr 6000 (Oct 15 Mar 16)

      Customer Dr 6000 (Apr 16 Sep 16)

      Customer Dr 12000 (Oct 16 to Mar 17)

      Customer Dr 12000 (Apr 17 to Sept 17)

      Unearned Revenue-Current Cr 1500 (Oct 15)

      Unearned Revenue-Current Cr 1500 (Nov 15)

      Unearned Revenue-Current Cr 1500 (Dec 15)

      Unearned Revenue-Non Current Cr 1500 (Jan 16 )

      and so on till Sept 17 THI

      IAS Clearing A/C will be debited by Avg monthly IAS rental and credited by an amount equal to actual receivables and will have 0 balance.

      From above posting we have segregated current and non current portion of lease rental .

      Now from accrual/deferral run we are posting following

      Unearned Revenue Current Dr

      Revenue A.C Cr

      but here we are stuck with a scenario when year 2015 ends we have to bring an amount equal to 2016 avg rental from Unearned revenue Non current to Unearned revenue current account and only then we want to start amortizing it through accrual/deferral run starting January 2016.

      Also we want to know what will happen if a contract is terminated prematurely, how will system behave to reverse the excess revenue which was booked through accrual runs.


  • Nov 20, 2015 at 04:31 AM

    I Am on vacation at the moment, will get back to you once i am back

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