Reclassification of Revenue Recognized Value

[misrasuman1]

Hi All,

Requirement from client user as below example:

Contract Value = 1000000 $

Period 1: Invoice to customer 150000 $

POC from Progress Analysis : 5% 

RA Method 07 based on progress analysis

Requirement is to see the accounting entries as below during settlement:

Revenue Recognition

Dr. WIP Revenue Recognized 50000 $ (POC*Contract Value)

        Cr. Billing Account (account is the invoice) 50000 $

Reclassify to Contract Asset/Liabilities

Dr. WIP Progressive Billing 100000 $ (Total Actual Billing - Rev recognized)

        Cr. Contract Liabilities Account 100000 $ 

Period 2

No actual billing in this month

So Total Actual Billing is same

Accounting entries required during settlement:

But POC = 20%

Revenue Recognized Total = 200000 $ (POC*Contract Value). Periodic = 150000 $

Revenue Recognition

Dr. WIP Revenue Recognized = 150000 $

        Cr. Billing Account (account is the invoice) 150000 $

Reclassify to Contract Asset/Liabilities

Dr. Contract Asset Account 50000 $ (Difference in Total Actual Revenue and Total Recognized Revenue)

        Cr. WIP Revenue Recognized 50000 $ 

This requirement has come from the IFRS 15 requirement and what I understood is only possible through RAR (Revenue Accounting principle) but is it possible in any other way?

I don't think this would be possible through any other enhancement to achieve and also not achievable from our current OKG8 configuration. Correct me if wrong. 

[Ken_Melching]

I'm not exactly sure what you are asking RA to do, but you have full control on what accounts are used for the Rev Rec adjustments.  Also, in RA configuration you can specify if the system reverses pervious period postings and posts new values OR post net differences. 

Also note that with RA Method 7 you will be adjusting (accruing and deferring) costs as well as revenues since the POC is applied to both.

Period 1

RANI = 50k

P&L Revenue = 150k from invoice

RA adjustment would be to defer 100k from the P&L to the B/S.  100k (dr.) P&L Revenue, 100k (cr.) Liability acct.

Period 2

RANI = 200k

RA adjustment would be to reverse the period 1 posting and accrue 50k on the P&L.  

100k (cr.) P&L revenue, 100k (dr.) Liability account

50k (cr.) P&L revenue, 50k (dr.) Asset account