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Inco term based Revenue recognition in India

Aug 18, 2017 at 02:52 PM

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Dear experts

I have following requirement from Indian client having factory in Gujarat and depot in North India. They also export goods to subsidiary and end customer in U.S.

As per accounting standard client wants revenue to be recognized when risk is transferred to customer. e.g. if inco term is CIF, DDU, DDP etc "Sales revenue" should be posted in GL when expected delivery date ( EDD ) is reached. Currently it is recognized when VF01 is done. At month end, Client has to manually offset such sales whose EDD is in next month. They do not want to do this manual task.

Accounting entry required are -

PGI

Dr Stock in transit 85

Cr Inventory 85

VF01

Dr Customer 118

Cr Sales clearing 100

Cr GST Payable 18

When Expected delivery date is reached

Dr COGS 85

Cr Stock in transit 85

Dr Sales clearing 100

Cr Sales revenue 100

We tried using "Proof of delivery" & VLPOD but it does not meet entire requirement.

How can Inco term based revenue recognition be done in SAP and above requirement be met ? What is best practice followed by other clients ?? Please share your thoughts.

Regards

Kapil

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2 Answers

G Lakshmipathi
Aug 22, 2017 at 06:45 AM
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If the requirement is statutory, then you can very well raise an OSS message so that SAP will provide a solution.

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G Lakshmipathi
Aug 21, 2017 at 01:06 PM
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What do you mean by Expected Delivery Date ?? Requested Delivery Date or something different ??

In normal cases for export sales, once the goods issue is posted, we raise a proforma invoice to fulfill custom formalities and once the Bill of Lading is received by the exporter, commercial billing document would be generated. This being the case, you have not mentioned when the billing document is generated Also you have mentioned system to show stock in transit which is not possible in standard export sales. It is not possible to post revenue recognition based on inco terms and you need to try with user exit

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Dear Lakshmipathi

Thanks for your feedback

1. Expected delivery date (EDD): Client has Route information available and for each shipment they know estimated date on which risk will transfer to other party. e.g if inco term is DDP they know expected date of reaching customer location and similiarly for FOB etc. Client wants "sales revenue" to be posted on day after EDD.

According to client, Inco term based RR is a statutory requirement and hence should be met by SAP.

It is possible to show stock in transit using Proof of delivery functionality in SAP (Tcode VLPOD).

In GST, Tax liability arises when goods are removed from your location. So I guess we would need to do VF01 after PGI itself, because I need to post "GST Payable" entry.

We are open to suggestions on how this requirement is handled in other clients.

Regards

Kapil

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