SAP Knowledge Base Article - Public

3096574 - Revenue Recognition Run Realizes Total invoice Amount of Customer Contract Item Before Its End Date

Symptom

  • You create a fix-price customer contract item and assign a straight-line accrual method to have its total net value/ invoiced revenue realized evenly during its life time. 
  • The customer contract item has been fully invoiced and the end date is reached. 
  • You manually set the item's fulfillment status to finished. 
  • You execute the revenue recognition run in a period before the item's end date and notice that the run realized the total net value already. 
  • No further revenue is realized in the next accounting periods of the item's life time. 

Environment

 SAP Business ByDesign

Reproducing the Issue

  1. In the Cost and Revenue work center go to the Sales Document Items view.
  2. Select Customer Contract items and find item ABC-XX (ABC-XX represents the customer contract item ID). valid from 01.07.2020 to 30.06.2021 for example. 
  3. Go to the Dates tab and verify that the item's End Date has been reached, 30.06.2021, and that the Final Delivery and Invoice Date is set (for example 01.09.2020, Posting date of Customer Invoice). 
  4. Navigate to the Accounting Data tab. 
  5. In the Revenues per period table you notice that the revenue is realized evenly in previous periods (such as 007.2020 to 002.2021). 
  6. But in the next period, here 003.2021, a very high revenue amount is realized. 
  7. You check the revenue recognition application log and notice that the Total Earned Revenue amount equals the total net value/ invoice amount of item ABC-XX. 
  8. When executing the run for the remaining accounting periods, such as 004, 005,006.2021 no further revenue is realized. 

Cause

After the fulfillment status of contract item ABC-XX was set to finished manually the overall status of the item changed to Completed.

For the Financials application SAP Business ByDesign derives a Final Delivery and Invoice Date (Check the Dates tab as above). This date is derived from the most recent business transaction on the item, here 01.09.2020 when the item was invoiced).

Once a contract item gets completed (fully delivered, fully invoiced, end date reached) the revenue recognition run realizes its full net book value in the chosen period, even if this period is before the period of its end date.

Example:

Contract Item ABC-XX

  • Start date: 01.07.2020
  • End Date: 30.06.2021
  • Invoice Date: 01.09.2020. 
  • After 30.06.2021 you manually finish the item's fulfillment status so the item status changes to Completed. 
  • You execute the revenue recognition run in a period before the end date, for example 003.2021 (March 2021).
  • The run realizes the full item net book value/invoiced amount. 

Resolution

This is the designed system behavior: Once a contract item is completed in Financials it is no longer relevant for revenue recognition*. The next revenue recognition run will clear all deferrals and accruals and realize the full net value of the item according to its final delivery and invoice date.

To prevent this situation finish fulfillment indicator before the end date of the contract item so that it gets completed automatically after this date is reached. Ensure that the revenue recognition run is executed in each accounting period in subsequent order.

If you finish the fulfillment later, verify first that the due revenue was correctly realized in all the periods of the contract item's life time.

If possible, avoid executing the revenue recognition run retrospectively.

Keywords

contract item, realized revenue to high, total invoiced revenue realized before end date , KBA , SRD-FIN-COR , Cost & Revenue , Problem

Product

SAP Business ByDesign all versions