The Performance Obligation tab records all performance obligations on the revenue contract, complete with any linked lines. You can create a performance obligation on the Performance Obligation tab using the context menu. Linked lines allow for sales order lines and trailer charges linked to the performance obligations.

The columns on a performance obligation line contain important information about the obligation.

Some of the fields on the performance obligation are calculated from the data stored on the performance obligation lines, including:

A history record is created each day that you edit the % Complete field on the performance obligation. If you change this field more than one time in a day, the history record for that day is updated. The revenue calculation uses history records to ensure that the revenue is correctly calculated for the effective date that you run the revenue calculation.

By default, you view all performance obligations defined against the revenue contract in a grid. However, you can also open a form that displays details of a performance obligation in tab format. You display the form view by opening the context menu on any performance obligation and choosing View Detail. The form view is overlaid on the grid view of the Performance Obligation tab, as displayed in Performance Obligation Tab – Form View.

The form view displays several tabs.

The Performance Obligation tab displays the:

The performance obligation tab displays additional fields, depending on the revenue recognition rule used. For example, if the rule is a percentage complete type rule, additional fields are displayed that enable you to update the complete percentage and the effective date for that percentage.

The Totals tab displays the performance obligation total information, including:

The Notes tab enables you to enter a note on the selected performance obligation line.

When you create a performance obligation and specify a rule of type Periodic or Custom Periodic, a set of period records is automatically generated when you specify a start and end date. This date range is the time frame over which the revenue of the performance obligation is to be recognized.

The number of periods generated depends on the period type defined on the revenue recognition rule and the date range you specify. For each generated period, a recognition percentage and recognition value are calculated and stored. These values are derived from the total value of the performance obligation and the number of periods generated.

Each period has a recognition date. This date is calculated based on the setting in the Recognition Point field in Revenue Recognition Rule (37.2.1). If the setting is Start of Period, the recognition date is set to be the first day of each period. If the setting is End of Period, the recognition point is set to be the last day of each period. If the rule uses an offset recognition point, the recognition date is set to the first date of the period plus the number of offset days.

There are special exceptions for the first and last periods generated for the performance obligation. For example, the rule uses the start of the period as the recognition point. However, the start date of the performance obligation has been set afterward. In this case, the first period recognition date is set to the start date of the performance obligation.

A similar situation arises when the rule uses the last date of the period as the recognition point and the end date of the performance obligation is before the last day of the last period. In this situation, the recognition date is set to the end date of the performance obligation. This recognition logic is displayed in Recognition Logic Example.

When the period or custom period rule uses GL periods, the periods created for the performance obligation are defined to fit the GL periods set up in the software.

During this period, the customer likely receives 12 invoices for the services covered by the performance obligation. However, on the revenue contract, 13 periods are created against the performance obligation, as displayed in Period Type of GL Period.

13 periods are created because revenue contract performance obligation periods are calculated to fit in with the GL periods set up on the system. The contract starts and finishes in the middle of the January periods in 2017 and 2018. Therefore, one of the 12 invoices for the service is split between the 1st and 13th periods on the performance obligation.

The percentage and value of the performance obligation is calculated by working out the percentage of revenue to be recognized daily. This percentage is based on the number of days in the revenue contract period. From this figure, you can calculate the percentage of revenue to be recognized in the first and last periods of the performance obligation.

To simplify accounting, for the remaining periods, the remaining revenue is split evenly across these whole GL periods. However, to split the revenue based on the number of days in each period on the performance obligation, you can change the recognition percentage and value of the difference periods.

If the revenue recognition rule uses a period type other than GL periods, performance obligation periods are calculated differently.

This time, only 12 periods are created, as displayed in Period Type of Monthly.

This time, the performance obligation periods are not tied to the GL periods of the system and are calculated from the start date of the performance obligation. The start date of the performance obligation is January 18, 2017 and the period extends one month into February, meaning the end date of the period is the February 17, 2017.

The value of the performance obligation is split evenly across the performance obligation periods. However, you can choose to change the recognition percentages and values.

The other revenue recognition rule period types—quarterly, bi-annually, and annually—work in a similar way to the monthly period type.

You can link sales order lines to a performance obligation regardless of the shipped or invoiced status of the lines. However, you can only link a sales order line to one performance obligation. If you attempt to link a sales order line that has already been added to a performance obligation on an existing revenue contract, you receive an error.

You must delete the sales order line from the performance obligation before you can add it to another contract. Deleting the sales order line triggers reverse postings for it.

You can also link sales order trailer charges to a single performance obligation. As with sales order lines, you can only link a sales order trailer charge to a single performance obligation. If you attempt to link a sales order trailer charge that has already been added to a performance obligation on an existing revenue contract, you receive an error.

You must delete the trailer line linked to the performance obligation before you can add that line to another revenue contract. Deleting the trailer line triggers reverse postings for it.

A performance obligation consists of a line number, a description, and a revenue recognition rule. The rule defines how and when the revenue contained in the orders attached to the performance obligation can be recognized.

A performance obligation must always have a description. If the Description field is left blank, the software sets the description to the first order line description linked to the performance obligation.

For each performance obligation, you can attach one or more sales order lines. Each order line displays columns with important information, as displayed in Performance Obligation Order Line Columns.

For each sales order line or trailer charge attached to the performance obligation, three sets of GL accounts and analysis codes are defined:

You can only view the GL accounts and analysis codes. The fields are read-only and default based on the sales revenue account and analysis set up on the sales order line or against the definition of the trailer charge. From this sales revenue account, the deferred and accrued revenue GL accounts and analysis are set according to the revenue GL account mappings you have set up. For more details, see Mapping Revenue GL Accounts.

If a matching GL account mapping record cannot be found, the system uses the deferred and accrued revenue account profiles defined for the customer to set the deferred and accrued revenue accounts and analysis. For more details, see Assigning Customer Defaults.

You can also choose to view and maintain the performance obligation linked lines using form view. Display form view by double-clicking a performance obligation line or by using the context menu. The form is displayed over the right-hand portion of the grid, as shown in Revenue Contract Performance Obligation Order Line Form View.

The form displays various tabs.

The Performance Obligation Line tab contains the following information:

The Totals tab holds the total information:

The Accounting displays GL account information and the SAF Defaults. Three sets of accounts and analysis are displayed.

The sales account and its analysis—division, cost center, and project—are gathered from different places depending on the line type. When the type is a sales order line, the details are gathered from the line itself and from the trailer code details for the trailer charge line.

The SAF defaults section contains the SAF concepts, values, and descriptions used on the performance obligation line, which are reused in the revenue recognition postings and calculation. The SAFs can be either:

You can view updates to the SSP and allocated transaction prices on the performance obligation lines. The tab displays the SSP and allocated transaction price history and the effective date for each change. For more details, see History Record.

You can also view and maintain invoice sub-records in form view on the Acceptance tab. It displays the invoices created from the sales order line linked against the performance obligation line. For more details, see Invoices.

A history of changes to certain fields is kept for the performance obligation line. These history records are created each time you edit the Standalone Selling Price or Allocated Transaction Price fields.

A history record is kept each day. If you make more than one change to either field on any day, the history record for that day is updated. The revenue calculation uses the history records to ensure that the revenue is correctly calculated for the effective date that you run the revenue calculation.

If the performance obligation uses a rule defined as being a customer acceptance rule, you can view more invoice information in the form of sub-records to the linked lines of the performance obligation, as displayed in Invoice Sub-records.

If you select the Invoice Accepted field, it indicates that the invoice revenue can be recognized. When you run the revenue calculation process for the contract, recognition postings are created.

If the customer acceptance revenue recognition rule also uses of proof of delivery, you must enter a value in the POD Reference field. This field records the delivery number from the commercial shipment company handling the delivery of the goods to the customer. If you leave the field blank and select the Invoice Selected field, you receive an error stating that the Proof of Delivery field must contain a value. However, the system does not validate any value entered in the Proof of Delivery field.

When the Invoice Accepted field is not selected, the revenue calculation defers the revenue of the invoice to the deferred revenue GL account you defined on the linked line record of the performance obligation.

All currency values—invoiced, deferred, accrued, and recognized—are net values. Therefore, these values are net of taxes, both excluded and included.

The net price of a linked line on a performance obligation can change over the lifetime of the revenue contract because an order line assigned to a performance obligation can be delivered in multiple shipments and multiple invoices. The prices charged for the goods can vary over time and tax rates can also change, affecting the calculated net price.

For a partially shipped invoice, the net price is calculated from the sales order line. However, after the sales order has been fully shipped and invoiced, the net price is calculated from the final invoice generated for the sales order line.

For each order line linked to the performance obligation, there must be:

The sales account and analysis defaults to the sales account and analysis defined on the order line.

The deferred revenue and the accrued revenue accounts default as follows:

You cannot save the revenue contract until the deferred revenue account has been set. You can use any standard GL account defined in the system. The only restriction is that the deferred revenue account cannot be set to use the same GL as the sales account.

The accrued revenue account is also mandatory. As with the deferred revenue account, it must be an active standard GL account and it cannot be set to use the same GL account as the sales account. In addition, it cannot be set to the same GL account as the deferred revenue account.

You can also create performance obligations by sales order using the context menu. Click the context menu item Add Obligations by Order, which displays a browse that enables you to select sales orders. When you select a sales order, a performance obligation is created for each sales order line. The rule of the performance obligation is set as the default rule on the customer record.