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Jul 20, 2010 at 12:38 PM

Recognising Revenues based on costs in Service Orders


We have configured SD Revenue Recognition function (ECC 5.0). We have warranty maintenance contracts running. On this basis we have the following scenario and issue.

The warranty maintenance contracts are created without a billing plan (Reqmt. type SE so that we can settle costs later). The value of which is transferred to Deferred Revenue Account and is recognised at the end of the contract period (As it bears the retention money with the customer). Until this step things are working fine. We use VF44 to recognise revenues.

However, there are costs incurred (both material & labour) in relation to such contracts. To track this, we create a Service Order s against the Service Contract for each month. Later on fulfillment, the orders are settled to the Service Contract. This is reflecting in the Service Order. But the finance team wants to recognise the revenues to the extent of costs incurred. I'm not sure how we can do this. The following is an example scenario.

Contract Value : $1000

Contract period : 1 yr (1.1.2010 to 31.12.2010)

Contract billed at the start of the year on 1.1.2010 so the amount is moved to Revenue Provision (Deferred Revenue)

At the end of the year $1000 lying in Deferred Revenue will be moved to Revenue Account through Revenue Recognition (VF44)

Now, costs incurred as follows which are booked in separate service orders against the contract and on completion, settled to the contract. There is no definite schedule for these costs.

Apr 2010 : $100

Jun 2010 : $200

Sep 2010 : $500

Now, the finance team wants to recognise revenue to this extent during the relevant periods. For eg.

Apr 2010 :

Deferred Revenue A/c $100

To Revenue A/c $100

Jun 2010 :

Deferred Revenue A/c $200

To Revenue A/c $200

Sep 2010 :

Deferred Revenue A/c $500

To Revenue A/c $500

And at the end of Dec 2010 :

Deferred Revenue A/c $200

To Revenue A/c $200

(for the remaining amount)

Can anyone guide me how this can be achieved?

Thanks in advance.