- You assign Accrual Method 304 - Straight-line – prorate partial periods to a Customer Contract Item with Fix Price Per Period Invoicing Method (flat rate).
- The life span of the Contract Item is 1 year exactly and it covers only full periods.
- You are aware that the due revenue of the first and last period is always calculated based on a daily rate when using accrual method 304.
- However, the amount realized in the first period seems not based on a day rate for a life span of 365 days.
SAP Business ByDesign
Reproducing the Issue
Customer Contract Item XYZ-XX background:
- Quantity: 1 month (time based)
- List price: 1.000,00 LC (LC=Local Currency)
- Start date: 01.01.YYYY
- End date: 31.12.YYYY (total life time: 1 year=365 days)
- Price per Period indicator is set
- Total net value for the full year: 12.000,00 LC
- In the Cost and Revenue work center go to the Sales Documents Items view.
- Select Customer Contract Items and find item XYZ-XX (XYZ-XX represents the Contract Item ID).
- In the General tab verify that the Invoicing Method is Fixed Price per Period.
- Navigate to the Accounting Data tab to verify that the item is using Accrual Method 304 - Straight-line – prorate partial periods.
- Execute the revenue recognition run. As you know, the due revenue of the first period is calculated based on a daily rate. You therefore expect the run to realize a revenue amount of 1.019.18 LC (12.000,00 LC ÷ 365= 32,88 LC x 31=1.019,18 LC (rounded)).
- Instead, the run realizes an amount of 1.018,50 LC (rounded).
- The reference unit of measure of the standard unit MON-Month is s-Second with a reference factor of 2.629.746. However, 2.629.746 is the average day quantity of a month, 30,4369 days (rounded).
- With the Price per Period indicator set the revenue recognition functionality calculates each period based on this average value.
- As a result, the life time of contract item XYZ-XX adds up to 365,2425 days.
- Based on this calculation, the daily rate of contract item XYZ-XX is 32,85 (12.000,00 LC ÷ 365,2428) so that the due revenue for the first period of the item is 1.018.50 (30,85 x 31).
You have several options to prevent this situation:
- If the contract item life time covers full periods, rather use accrual method 303 - Straight-line – even periods.
- If you must use accrual method 304 - Straight-line – prorate partial periods
- use a unit of measure that is not time based, for example EA-Each and maintain the full contract item net value,
- or do not work with a flat rate item and remove the Price per Period indicator. Enter the full order quantity instead, here 12 months.
This way, the due revenue calculation is based on 365 days. In our example, a revenue amount of 1.019,18 LC (12.000,00 ÷ 365 days =32,88 x 31) is due in the first period of the contract item's life time.
contract item, revenue first period, 304 - Straight-line – prorate partial periods, daily rate , KBA , SRD-FIN-COR , Cost & Revenue , Problem