Revenue Recognition
Revenue recognition is increasingly becoming an important requirement. This is especially true with the introduction of new accounting standards like ASC 606 and IFRS 15 that aim to provide a more robust framework for addressing revenue issues. A new revenue module provides functionality that enables you to:
• Define revenue recognition contracts complete with performance obligations.
• Define and work with accrued and deferred revenue accounts. You can create deferred revenue daybooks to enable you to track journal entries and postings to handle the deferral and recognition of revenue.
• Define revenue recognition rules and link them to the performance obligations attached to revenue contracts. You can use the following recognition rules:
• Acceptance - A performance obligation requires a form of acceptance such as proof of delivery.
• Payment - Revenue is not recognized until payment has been received.
• Time-based - A performance obligation can be marked as fulfilled after a set time period after goods or services have been delivered or invoiced.
• Percentage Complete - Revenue is recognized based on the difference between the amount of the contract invoiced and the amount of work done on the contract.
• Periodic - Revenue is recognized monthly or periodically, such as for warranties or maintenance contracts.
• Custom Periodic - Revenue recognition is subject to special considerations. For example, revenue amounts might be split unevenly across financial periods.
You can also:
• Record revenue recognition data against the performance obligations of a revenue contract and mark performance obligations according to their completeness.
• Run revenue calculations on contracts, and then display the effects of the revenue calculations on the relevant contracts in an audit report.
• Perform reviews on different contract versions and take appropriate action.
• Batch process revenue calculations at a particular time each day to keep the revenue contracts up-to-date.