SAP Knowledge Base Article - Public

2896346 - IFRS15 - Completed Sales Order Item Still Considered for Revenue Recognition in IFRS Set of Books

Symptom

  • You create a project-based, fix-price Sales Order item. 
  • You assign Accrual Method 106 - Recognize based on Manual Amounts to the Sales Order Item.
  • All incurred Costs and invoice revenues have been correctly manually maintained and got realized accordingly.
  • You close the assigned Project Task to complete the item's delivery status and finish the Invoicing status of the Sales Order item.
  • As a result, you expect the Revenue Recognition run to no longer process this Sales Order item but rather set the Revenue fully Recognized Indicator. 
  • Instead, the Revenue Recognition run defers all amounts again, after they had been fully realized in previous Revenue Recognition run(s). 

Environment

SAP Business ByDesign

Reproducing the Issue

To check the Sales Order Item status:

  1. In the Cost and Revenue work center go to the Sales Document Items view.
  2. Find Sales Order item ABC-XX (ABC-XX represents the Sales Order Item ID). 
  3. In the Accounting Data sub-tab you verify that Accrual Method 106-Recognize based on Manual Amounts is assigned to the Sales Order Item.
  4. You notice that the Revenue Fully Recognized indicator is not set. 
  5. In the Dates sub-tab you verify that a Final Delivery and Invoice Date appears, indicating that the item is completed for Delivery as well as Invoicing. 
  6. In the Associated Objects tab, find the Project Tasks ID assigned to Sales Order Item ABC-XX. 
  7. Click on the ID to verify that the Project Task is closed. 

To check the Manual Revenue Recognition Data:

  1. Press Edit Manual Revenue Revenue Recognition Data and choose Recognized Costs and Revenues. 
  2. Select the line of the IFRS Set of Books. 
  3. In the Details table, check the last validity period. Check the Valid To date, showing DD.MM.YYYY. 
  4. The Recognized Revenue Amount is this line equals the Actual Revenue Amount in the Reference Values section underneath.
  5. The Recognized Cost Amount in this last line equals the Actual Costs amount, displayed in the Reference Values section underneath. 

As the Valid To date has passed and as the Sales Order item's Costs and Revenues are fully realized, you expect this item to be completed for Revenue Recognition (Revenue fully Recognized Indicator set) and not to be processed further by the Revenue Recognition (You might have noticed this behaviour for not IFRS relevant Set of Books).

However, in an Accounting Period after the Valid To Date, all the Costs previously realized are deferred. And all the Revenue, which got previously fully realized is posted to the Contract Liabilities Account:

  1. In the Cost and Revenue work center go to the Revenue Recognition view.
  2. Find the respective Revenue Recognition run and select the IFRS set of book's Application log.
  3. Navigate to the Processed Successfully tab and choose the Advanced Information tab.
  4. Select POC Based and filter for Sales Order Item ABC-XX.
  5. The full item's cost amount appears here as Total Deferred CoGS Amount. The full item's Revenue appears as Total Contract Asset Amount. 

Cause

  • The IFRS15 functionality is active: With IFRS15 functionality, Revenue Recognition is based on the Revenue Accounting Contract (RAC) and its Performance Obligations(POB). Every Sales Document Item must be assigned to a POB item.
  • Sales Order Item ABC-XX is still being considered by Revenue Recognition as further, not completed Sales Order Items are assigned to its RAC.
  • Only when a RAC is completed, meaning, when all items are fulfilled and invoiced, the Sales Order Items associated with the RAC will be finished for Revenue Recognition.
  • As long as there are further, not completed Sales Order Items assigned to the RAC of Sales Order Item ABC-XX, this item will not be completed for Revenue Recognition but considered until all items are completed. 
  • This means, the item is still considered in a period after the last Valid to date of the Manual Revenue Recognition data; If no Cost or Revenue Amounts are maintained for this future period, all Costs get Deferred and all Invoiced Revenue is posted as Contract Liability.

Resolution

Rather than using a specific Valid To date for the last period, use Unlimited/Valid To date: 31.12.9999.

First check if there are further Sales Order Items associated with the RAC of Sales Order Item ABC-XX:

  1. In the Sales Document Items view of the Cost and Revenue work center find Sales Order Item ABC-XX.
  2. In the Revenue Accounting Contract column you see the RAC ID XYZ (XYZ represents the RAC ID which Sales Order Items ABC-XX is associated with). 
  3. Click on this ID to open the RAC. 
  4. In the Contract Changes tab, under Sales Document Involved press Expand All.
  5. You can now see all POBs of this RAC with the respective Sales Order Item assigned to them. You see POB XYZ-YY, which is associated with Sales Order Item ABC-XX. You might see further POBs, for example XYZ-ZZ associated with another Sales Order Item, say, DEF-XX (DEF-XX represents the ID of a different Sales Order Item). Or you might see further Sales Order Items associated with the same POB, XYZ-YY, which Sales Order Item ABC-XX is associated with as well. 

To check the Status of the other Sales Order item(s):

  1. Go back to the Sales Document Items view.
  2. Find Sales Order Item DEF-XX.
  3. Check the Dates tab. If there is no Final Delivery and Invoicing Date maintained, the Sales Order item is not completed. Hence, all items associated with RAC XYZ will be considered by the Revenue Recognition run. 

To amend the Validity of the last Manual Revenue Recognition Data:

  1. In the Cost and Revenue work center go to the Sales Document Items view.
  2. Find Sales Order item ABC-XX (ABC-XX represents the Sales Order Item ID).
  3. Press Edit Manual Revenue Revenue Recognition Data and choose Recognized Costs and Revenues.
  4. Select the line of the IFRS Set of Books.
  5. In the Details table check the last validity period. Check the Valid To date, showing DD.MM.YYYY. 
  6. Change this last Valid to Date to 31.12.9999 (Unlimited).
  7. Press Save and Close. 
  • After this change the Deferred Costs and Contract Liabilities will be offset and realized again.
  • Sales Order Item ABC-XX will still be considered by future runs. But, as there is no change in the values to be realized, no further postings will be performed for this item. 
  • Once all Sales Order items associated with RAC XYZ have been completed, the will be finished for Revenue Recognition. 

Keywords

Completed Sales Order item, IFRS15, Contract Liability, Recognize Based on Manual Amounts, Revenue fully Recognized, IFRS , KBA , SRD-FIN-COR , Cost & Revenue , Problem

Product

SAP Business ByDesign 1911