Revenue Calculation: Periodic Performance Obligations

The revenue recognition postings created for performance obligation using periodic or custom periodic revenue recognition rules are similar to the postings created for percentage complete revenue recognition rules. The amount of revenue available to recognize increases with each period of the contract. The postings created for such performance obligations can recognize, defer, or accrue the revenue. As with the other revenue recognition rules, the accounts used for these postings are defined on the linked lines of the performance obligation.

When a performance obligation uses a periodic or custom periodic rule, the revenue of the performance obligation is handled on a period-by-period basis. The periods are defined against the performance obligation and store the percentage and value in discrete and cumulative forms. Each time the revenue calculation is run during the lifetime of the contract, the revenue of the performance obligation is deferred, accrued, or recognized, depending on whether the recognition date of a period has been reached and whether revenue has been invoiced:

• Where the cumulative available-to-recognize value is less than the invoiced amount of the performance obligation, the available-to-recognize value is recognized to the sales revenue account. The remaining invoiced amount is deferred to the deferred revenue account.

• Where the cumulative available-to-recognize value is greater than the invoiced amount of the performance obligation, the invoiced amount is recognized to the sales revenue account. The remainder of the available-to-recognize value is recognized to the sales account with the offset posted to the accrued revenue account.

Example: A revenue contract has been created with a single performance obligation using a periodic rule. There are 12 periods corresponding to the calendar months. The amount on the performance obligation is $1200.00. The periods created for the performance obligation are displayed in Periodic Recognition Rule – Invoice Monthly. Invoices are generated at the start of each period, with the revenue being available to recognize at the end of each period.


Period	%	Cumulative %	Value	Cumulative Value	Period Start Date	Period End Date	Invoice At	Recognize At
1	8.33	8.33	S100	$100	January 1	January 31	January 1	January 31
2	8.33	15.67	S100	$200	February 1	February 28	February 1	February 28
3	8.33	25	S100	$300	March 1	March 31	March 1	March 31
4	8.33	33.33	S100	$400	April 1	April 30	April 1	April 30
5	8.33	41.67	$100	$500	May 1	May 31	May 1	May 31
6	8.33	50	$100	$600	June 1	June 30	June 1	June 30
7	8.33	58.33	$100	$700	July 1	July 31	July 1	July 31
8	8.33	66.67	$100	$800	August 1	August 31	August 1	August 31
9	8.33	75	$100	$900	September 1	September 30	September 1	September 30
10	8.33	83.33	$100	$1000	October 1	October 30	October 1	October 30
11	8.33	91.67	$100	$1100	November 1	November 30	November 1	November 30
12	8.33	100	$100	$1200	December 1	December 31	December 1	December 31