A Revenue Recognition run for a Sales Order item XYZ-10 in foreign currency results in non-expected reversals of previously fully recognized revenues as deferred revenues. The applied Accrual Method is Recognize using cost-to-cost POC. The Percentage of Completion already is 100% and Sales Order item XYZ-10 has been fully invoiced.
Therefore all revenues should have been realized previously already and the expectation is that no additional adjustments or further revenue deferrals are to be shown.
Reproducing the Issue
- In the Cost and Revenue work center choose the Periodic Tasks view and Revenue Recognition.
- Select the Revenue Recognition - Run ID and select Log Result.
- Under Processed Successfully tab choose PoC Based and filter for Sales Order item XYZ-10.
- Here the Current Recognized Revenues Amount shows a figure with a negative sign.
- Find the resulting Journal Entries under Postings / Journal Entries tab.
The applied Accrual Method: Recognize using cost-to-cost POC and its realization logic can explain the observed behaviour when taking applied exchange rates into account.
For Accrual Method: Recognize using cost-to-cost POC the Revenue Recognition calculates effective revenues applying the current percentage of completion (PoC) to the Plan Revenue at the time.
In the Sales Document Items view this can be illustrated by choosing the Edit Manual Revenue Recognition Data / Percentage of Completion button.
The Plan Revenue represents the Net Value of Sales Order item XYZ-10, here in foreign currency. Due to currency fluctuations over time - an increase of the Company Currency value will reduce the converted Plan Revenue in Company Currency at the time of the Revenue Recognition Run.
When comparing the already invoiced amount in Foreign Currency we see now an 'Over-invoicing' in relation to the now reduced Plan Value.
|Exchange Rate CHF/EUR in 2014:||1,2|
|Exchange Rate CHF/EUR in 2015:||1,05|
Sales Order item XYZ-10 shows a Net Value of 10.000 EUR in 2014. The Plan Revenue in Company Currency therefore is: 12.000,00 CHF.
Sales Order Item XYZ-10 is fully delivered and invoiced already in 2014. The PoC is 100% and the revenue fully recognized in 2014 as 12.000,00 CHF.
In 2015 the associated project is still open and the Sales Order status still In Process. Sales Order item XYZ-10 is therefore included in the Revenue Recognition applying the Accrual Method: Recognize using cost-to-cost POC.
The Plan Revenue in Company Currency now is: 10.500,00 CHF. The difference of Actual Revenue (12.000,00 CHF) and Plan Revenue in Company Currency (10.500,00 CHF) is 1.500,00 CHF. This amount will now be shown as Deferred Revenue.
In such a scnenario - if revenues exceeding the Plan Revenue shall be acknowledged as realized revenues, then Project (task) and Sales Order (item) have to be completed.
Another option would be the modification of the applied Accrual Method to Reverse deferrals and accruals and to re-run the Revenue Recognition for the concerning period.
KBA , SRD-FIN-COR , Cost & Revenue , How To