3547953 - How Event-Based Revenue Recognition (EBRR) calculates realized revenue in cases of cost based POC (Percentage of Completion)

When projects involve multiple currencies, fluctuations in exchange rates can lead to variations in the recorded value of cost and calculated revenues by EBRR.

This note describes how EBRR calculates realized revenue utilizing the cost based POC method for professional service projects with plan source strategy 306. (as of 2508, additional plan sources can be selected via configuration)

The example below is based on the previously available method (key SPFC). Starting with 2508, a new method (key SPFCFX) is available that calculates realized revenue using current FX rates. The percentage-of-completion (POC) calculation described below is identical for both methods when source 306 is used; the methods differ in the calculation of realized revenue and WIP.

EBRR recognizes revenue real time (1) with the corresponding cost posting and during period-end closing (2) which is usually performed at month or fiscal period end.

SAP S/4HANA Cloud Public Edition

Overview of EBRR Calculation

As noted above EBRR calculates in real time and recalculates during the fiscal period-end run.

Realtime EBRR calculation

With EBRR active, the system will post realized revenue at the time of time confirmation. The system uses the following steps to calculate the revenue:

1. POC calculation:

1.  First planned costs in project currency are calculated:

The planned quantity per period is multiplied with the cost rate per period.

If the cost rate currency is different to the project currency, the currency conversion is done with P rate, which is valid at the beginning of the period. By default, the P-rate is used. The currency type for plan category PRO01 (used for plan calculation) can be changed. Please note the following exception: if project currency is equal to global currency the P rate valid at the beginning of the calendar year will be used.
Exception: if there is a saved EAC version - done in app review customer projects - available, then this saved EAC data are taken.

1. If the project currency is not equal company code currency, then the planned cost in project currency is converted into planned costs in company code currency using M rate (wbs billing element creation date)

1.  Finally, POC is calculated:

1. Realized revenue calculation:

Period-End EBRR calculation – using the review app functionality

Using plan source 306 together with the Review app, actual-to-plan deviations are taken into account:

• System-driven changes in expense types or quantities are automatically considered.
• The project manager can manually adjust the Estimate at Completion (EAC).

In this case, during the period-end run, the system will adjust the realized revenue based on two key forecasting variables: Estimate to Completion (ETC) and Estimate at Completion (EAC). The ETC calculation depends on the project's planned cost, which can be influenced by the P-Rate, as previously detailed.

1.  The Review app calculates all KPIs per expense type and per resource. Different resources are determined whenever any of the following differ: role/activity type, work item, contributing sales organization/ company code. Different expense types are treated separately as well. POC calculation

1. Planned costs are calculated per resource type based on the project’s resource planning
   See 1. A) above and apply the same calculation.

1. Then calculate the ETC cost based on customer project data as follows:

1. Next, calculate the EAC cost as follows:

All actual costs and expense postings on the assigned WBS elements are included.

Note: Actual postings to G/L accounts, that are not assigned to the EBRR source, are excluded from the calculation.

1. Then, the EAC cost is converted into company code currency in the event that the project is in a different currency. In order to do this, the system uses an average rate which is calculated based on the actual cost.

1. Based on the transferred EAC costs in company code currency – provided by the CPM application - EBRR calculates the POC (Percentage of Completion):

1. Realized revenue calculation:

Finally, realized revenue is calculated for Key SPFC as follows:

Please note: When plan source 306 is used, ACDOCP is not read during the process.

Ways to Influence POC Calculation

If you want to influence the POC calculation by using current conversion rates as opposed to the P-rate, you can update the used P-rate(s) with the current currency rate and recalculate the customer project. The recalculated amounts will be used at period end as the basis for the ETC calculation.

You can select plan source strategy 500 in EBRR configuration and use a manual plan category for the EAC/ plan costs.

EBRR, revenue recognition, customer project, POC, calculation, exchange rate, currency, Professional Services, Projects, fixed price projects, plan source 306

KBA , CO-PC-OBJ-EBR-2CL , Event-Based Revenue Recognition (Public Cloud) , How To