5 5 Woble

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Copyright 2014 by Karen Brownfield COLLABORATE 14

Rev Up Your Revenue Recognition with EBS R12

Karen Brownfield
Infosemantics, Inc

Abstract
11i supported revenue recognition through accounting rules which support defined schedules, but for many
companies additional functionality is required. 12.1.3 / 12.2.3 introduces event and contingency based
recognition. his presentation e!plains the old and new methods with e!amples.

What is Revenue Recognition
"evenue "ecognition in #racle $B% is the process that determines when and how much of each invoice and credit
memo can be accounted to the assigned revenue account&s'. "evenue "ecognition also creates the receivable, ta!,
freight and (uto)nvoice clearing account assignments. "evenue should be recogni*ed when the goods are
delivered &or services performed' and cash receipt is reasonably certain.

)f you are running #rder +anagement, there is a corresponding process in #racle ,osting that matches ,#-% &,ost
of -oods %old' to the invoice revenue and recogni*es ,#-% in the same percentage as revenue is recogni*ed.

By default, #racle recogni*es all revenue immediately, i.e. as of the -. date of the transactions. But if your
company is sub/ect to any rule that requires revenue to be recogni*ed in the future or over multiple periods, then
you should be aware of the three methods provided by #racle in "elease 12
(ccounting "ules
$vent Based
"evenue (ccounting +anagement &"(+' 0i*ard

Invoice and Accounting Rules
)nvoice "ules govern the recognition of "eceivables and are required if using (ccounting "ules &which is one
method to govern the recognition of "evenue'. #racle seeds two types1
Bill in (dvance 2 uses the start of the "evenue recognition cycle. he -. 3ate is changed to the first date
of the earliest revenue period &based on the earliest start date entered in the "ules tab of the .ines
region'
Bill in (rrears 2 uses the end of the "evenue recognition cycle. he -. 3ate is changed to the either the
end date specified in the "ules tab of the .ines region or the same day as specified in the start date in the
"ules tab of the .ines region, but in the last period of the schedule

4ote1 if you have applied 11i.(".4 &patch 5652376', 11i.(".# &patch 8297259', or patch 835797 for
"12.(".( or "12.(".B &12.7 or 12.1', then the transaction date is not changed, /ust the -. 3ate.

#racle does not permit user:defined )nvoice "ules.

"ecognition of "eceivables also governs when ta!es, freight, and late charges are recogni*ed.

)nvoice "ules are defined at the invoice header and are only applicable with the class ; <)nvoice=. 4ote that ,redit
and 3ebit +emos inherit )nvoice "ules from the associated invoice. (ssigning an )nvoice "ule to an invoice tags it
for processing by "evenue "ecognition. )f no )nvoice "ule is specified, the "ules tab on the .ines window is
disabled and revenue is recogni*ed in total based on the -. date in each line.

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)f used, the )nvoice "ule +>% be specified before clic?ing .ine )tems. 4ote that no changes are allowed to the
invoice rule once you have clic?ed this tab. &4ote also that $vent Based does not require an invoice rule.' )f you
specify an invoice rule, you +>% specify an (ccounting "ule.

(ccounting "ules govern the recognition of "evenue and are specified at the line level. $ach line can have a
different rule

(ccounting "ules are user defined &4avigation from "eceivables +anager1 %etup @ ransactions @ (ccounting
"ules'. #racle seeds one type 2 )mmediate. his rule assumes the Aeriod ype is +onth, but this can be changed.
4ote that if you use an (ccounting "ule with a Aeriod that doesn=t match the Aeriod type specified on the calendar
associated with your .edger, you will receive the error B(AA:(":112291 Alease define all periods in which revenue
is to be recogni*ed or creditedC.

(ccounting "ules support four types although you can define multiple rules using each type.

Fixed Schedule
he period type and number of periods are entered in the header. #racle will create a schedule with the D to be
recogni*ed evenly divided over each period. Eowever, you can override the percentages as long as the resulting
total ; 177. Fou can also specify the date on which to recogni*e the revenue if you specify <%pecific 3ate= as the
period type. 4#$1 this is the one e!ception to the rule that the period type must be the same as the period type
assigned to your ledger calendar.

his method is called Gi!ed 3uration in 11i

#racle seeds the )mmediate (ccounting "ule. 4ote that it is defined using the Aeriod type of +onth. %o if your
ledger calendar uses a different period type, ma?e sure you update the period type on this seeded rule.

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)f you want to delay specifying the revenue recognition schedule, chec? the 3eferred "evenue chec? bo!. his will
cause revenue to be deferred to an unearned revenue account and you must use the "evenue (ccounting
+anagement &"(+' wi*ard &see later sections of this paper' to recogni*e the revenue. >sing a Gi!ed %chedule
with the 3eferred revenue flag chec?ed is not allowed with an )nvoice "ule of Bill in (rrears.

Variable Schedule
his type is used when the number of periods will not be ?nown until the invoice is entered. #nce the number of
periods is entered, the percentage for each period will be evenly divided. Fou do not need to enter anything in the
schedule section however, you can set the percentage for the first period and then #racle will divide the remaining
percentage over the other periods.

his method is called Hariable 3uration in 11i.

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Daily Revenue Rate, All Periods
his method divides the revenue by the number of days between the start and end date specified on the invoice
line. he revenue is then charged to each period by the number of applicable days in that period.

Daily Revenue Rate, Partial Periods
his method also divides the revenue by the number of days between the start and end date specified on the
invoice line. he revenue is charged by day to the first and last period &partial periods'. he remaining revenue is
divided evenly by the number of full periods and this amount is then charged to each full period.

( schedule is not needed for either 3aily "evenue method. Both these types were added to 11i in GA.- via patch
589I126.

he easiest way to demonstrate the difference between the four methods is with an e!ample. 0e will use a J677
invoice that starts on Kanuary 1I and ends on (pril 13 &67 days'. 4ote that for the Hariable %chedule we set the
first period to ta?e 27D. (nd the Gi!ed %chedule rule specified I periods of 25D each period.

(lthough there is 67 days between the start and end date, four periods are affected. he Gi!ed %chedule type
specified to ta?e 25D each period, so J677/I ; J225 each period. he Hariable %chedule too? 27D of the amount
for the first period &J197' and then divided the remaining JL27 by 3 to get J2I7 for the remaining 3 periods. he
3aily "evenue "ate (ll Aeriods divided the J677 by 67 and then multiplied it by the number of days in each period
or partial period. he 3aily "evenue "ate, Aartial Aeriods divided the J677 by 67 and then multiplied it by the
number of days in each partial period &J197 and J137'. he remaining amount &J677 : J197 : J137' was divided by
the number of full periods yielding J265 for Gebruary and +arch.

Enterin Accountin Rule on an Invoice
(fter $ntering the invoice header information &including the )nvoice "ule', clic? the .ine )tems button. $nter the
appropriate information on the +ain tab, and then clic? the "ules tab. his tab is not available if no )nvoice "ule is
specified, and if you clic?ed the .ine )tems button before specifying an )nvoice "ule, you cannot go bac? and add
one. )f an )nvoice "ule was specified, then each line +>% have an (ccounting "ule, even if that rule is the seeded
rule )mmediate.
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)f the rule type is Gi!ed %chedule, the duration will default in, enter the start date. )f the type is Hariable %chedule,
enter the M of periods. )f the type is 3aily "evenue "ate, (ll Aeriods or 3aily "evenue "ate, Aartial Aeriods, enter
the start and end date but do not enter duration.

(ll periods must be defined in your calendar, but they do not have to be open or even Guture $nterable. ).e. if you
enter duration of 12, then your calendar must have the current period plus the ne!t 11 periods defined. )n
addition the Aeriod type on the (ccounting rule must be the same as your ledger calendar. )f any of the above is
violated, you=ll see the following error message.

"ules can be changed until "evenue "ecognition is run. (fter that no changes to the rules are allowed.

Affect on the !ransaction
(fter entering the invoice, if you clic? Hiew (ccounting, you will see BmodelC or Bplace holderC rows.

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)f your )nvoice "ule ; )n (rrears, >nearned "evenue will be shown as >nbilled "evenue

(fter "evenue "ecognition is run, clic?ing Hiew (ccounting will spread the revenue across the periods based on the
(ccounting "ules entered for each line. Gollowing is a picture showing part of the lines generated for the second
line. he rule stated to spread the revenue across 3 periods so you see three entries for "evenue for J37 with -.
dates in 3 different months with corresponding entries for >nearned "evenue for NJ37@. 4ote that this did not
delete the line for >nearned "evenue.

.ine 1 is still in >nearned "evenue as the (ccounting "ule for this line has the 3eferred "evenue flag chec?ed.
"emember use of rules with this flag require the "(+ wi*ard to recogni*e the revenue.

+#% notes 11216II.1 B>nderstanding and roubleshooting "evenue "ecognition in #racle "eceivablesC and
111863I.1 BEow to %etup and roubleshoot )nvoicing and (ccounting "ulesC describes how the transaction is
recorded in the various tables and provides useful advice for troubleshooting "evenue "ecognition when )nvoice /
(ccounting "ules are utili*ed.

"hen Rules are Assined to an Item
(ccounting and )nvoicing "ules can be assigned to items on the )nvoicing tab. hey will then be used if an invoice
is created by a transfer from #rder +anagement and the item is referenced on the order or when the item is
specified on the invoice.

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)f the invoice is entered manually, the invoice rule must be specified on the header. #bviously a transfer from #+
transfers both the invoice and accounting rule.

Running Revenue Recognition
"unning "evenue "ecognition is required if any invoices specify )nvoice "ules. "evenue "ecognition is invo?ed
Batch program &"evenue "ecognition or "evenue "ecognition +aster Arogram'
Grom ransaction ools menu &"12 only', ,reate (ccounting 2 runs (ccounting and "evenue "ecognition
for a specific invoice
%ubmit (ccounting concurrent program &not ,reate (ccounting' &"12'
-eneral .edger ransfer Arogram &11i'

(ll invoices with accounting rules must pass through revenue recognition, even if the rule is B)mmediateC. his is a
change from the 11i behavior due to the 11i behavior that caused grouping rules to fail.

he navigation to run the batch program is &from "eceivables +anager' ,ontrol @ (ccounting @ "evenue
"ecognition. ,hoose either <"evenue "ecognition= or <"evenue "ecognition +aster Arogram= &used for high
volume'. he parameters for <"evenue "ecognition= are <Arint Gormat= &%ummary or 3etail' and <,ommit 0or?=
&Fes or 4o'. Gor the latter, choose <4o= if you wish to review the distributions first in the report &choose 3etail'
without actually creating these records.

he parameters for <"evenue "ecognition +aster Arogram= are <Arint Gormat= &%ummary or 3etail' and <4umber of
0or?ers= &default ; I'. 4ote that you cannot use the latter on a system with less than two processors.

)f you choose <,reate (ccounting= from the ools menu or the concurrent program <%ubmit (ccounting=, note that
revenue recognition is not invo?ed if you choose to run the accounting in 3raft mode. 0hen "evenue "ecognition
is invo?ed from either accounting process, the report is always in %ummary mode. Gor 11i, "evenue "ecognition is
also invo?ed whenever you run <-eneral .edger ransfer Arogram= and the "evenue "ecognition report is always in
3etail mode.

4ote that %ubmit (ccounting is not the same program as ,reate (ccounting, although both are run from the
concurrent manager. he ,reate (ccounting program does not invo?e "evenue "ecognition. )f you are using this
feature, you should always choose to use the <%ubmit (ccounting= program.

Event Based Revenue
%ometime revenue cannot be recogni*ed on a predetermined schedule. %ometimes the right to recogni*e revenue
depends on the occurrence of a specific event such as delivery of goods, receipt of payment, or customer
acceptance. "elease 12 supports this type of recognition through "evenue Aolicies and ,ontingencies and
(ssignment "ules. $vents can be
ime Based, i.e. based on passage of time
Aayment Based, i.e. based on collection of monies
#thers such as (cceptance by ,ustomer or Aroof of 3elivery

%etups for "evenue Aolicies, ,ontingencies, and (ssignment "ules are seeded in the "evenue +anagement %uper
>ser "esponsibility &not "eceivables +anager'. (s it is annoying to continually switch responsibilities, the "evenue
+anagement +ain +enu &("O"$H+-+O"3"O+()4O+$4>' can be added to the ("O%$>A%O->) menu &which
is included in the top menu for "eceivables +anager. (s the ("O"$H+-+O"3"O+()4O+$4> menu does
duplicate many of the functions already available to the "eceivables +anager responsibility, an alternative is to
create a custom menu with the sub:menus and functions not available to "eceivables +anager. his resulting
menu would loo? li?e the following picture.
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here are two B"evenue AolicyC functions. Aic? the one with the Gunction 4ame (""3"O#AO.$H$.OG>4,)#4.
>se B"evenue +anagement -lobal +enuC, not B"evenue +anagement -lobal +enuO-C and use B,ontingencies
3efinitionC, not B,ontingencies 3efinitionO-C.

Revenue Policies
"evenue Aolicies are a somewhat limited set of rules defined at the #perating >nit level that apply to all invoices in
the specified operating unit. )f a deviation from policy is detected, #racle assigns a contingency and thus defers
recognition until the contingency e!pires. "evenue Aolicies are optional. ,ontingencies can be created that apply
to a smaller subset of invoices, such as a transaction type or even a specific customer. hese types of contingencies
require an assignment rule to have the contingency applied.

"evenue Aolicy setups are accessed from the "evenue +anagement %uper >ser responsibility &"evenue Aolicy P
"evenue Aolicy'. #racle supports two types of policies1 ,redit ,lassification and Aolicy hresholds.

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(s the form states, you can specify up to 3 credit classifications that will cause revenue to be deferred for all
invoices for a customer that is assigned the specified credit classification. "emember, policies are operating unit
specific and apply to all invoices in that operating unit. he ,redit ,lassification policy assigns the contingency
B,ustomer ,reditworthinessC and defers recognition of revenue until payment is received.

here are two types of Aolicy hresholds
%tandard "efund Aolicy 2 this policy is used for invoices associated with a contract &#racle %ervice
,ontracts'. )f the contract offers a refund period greater than the value you specify here, the transaction
is assigned the contingency B"efundC. "evenue is deferred until the refund period e!pires
%tandard Aayment erm 2 this policy causes invoices with a payment term that e!ceeds the number of
days entered to be assigned the B$!tended Aayment ermC contingency. "evenue is deferred until
payment is received

%uppose an invoice is entered as shown by the following picture. 4ote that the customer has been assigned a
,redit ,lassification of B4ew ,ustomerC.

,ompleting the invoice invo?es the "evenue +anagement $ngine which evaluates the invoice against the Aolicy
and applies the ,ustomer ,reditworthiness contingency due to the B4ew ,ustomerC credit classification and
applies the $!tended Aayment erm contingency due to a Aayment erm of over 95 days.

he B,ontingency Based 3eferred "evenueC report will list all invoices with assigned contingencies that prohibit
revenue recognition. ,ontingencies will remain until either they e!pire &run the "evenue ,ontingency (naly*er' or
they are manually removed using the "(+ wi*ard.
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#ontinencies
0hile the policy can assign a ,ontingency, contingencies can be defined at lower levels such as customer or
transaction type &assignment at this level requires defining assignment rules'. $ach contingency must have a
corresponding "emoval $vent. #racle seeds 13 ,ontingencies that cannot be modified, but you can create your
own.

,ontingencies are setup from the "evenue +anagement %uper >ser responsibility &"evenue ,ontingencies P
,ontingencies 3efinition'.

he above contingency is associated with a policy but can also be referenced by an assignment rule. he following
contingencies are not. Both require a removal event to be specified. "emoval events are limited to1

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he ime (ttribute can either trigger the removal event or be Bin addition toC the removal event. )n the picture
shown below, revenue recognition can occur after the invoice is generated (43 1 day has elapsed since the %hip
,onfirm 3ate.

$vent attributes are limited to the following1

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he seeded contingencies and their removal events and &optional' policies are1 &none have event attributes'
,ancellation ,ontingency $!piration
,ustomer ,reditworthiness Aayment ,redit ,lassification
3elivery Aroof of 3elivery
3oubtful ,ollectibility &sic' Aayment
$!plicit (cceptance ,ustomer (cceptance
$!tended Aayment erm Aayment
Giscal Gunding ,lause ,ontingency $!piration
Gorfeitures ,ontingency $!piration
)mpaired .oans Aayment
)nstallation ,ustomer (cceptance
.easing 3oubtful ,ollectibility &sic' Aayment
Are:Billing (cceptance )nvoicing
"efund ,ontingency $!piration "efund Aolicy

Assinment Rules
(ssignment "ules tell the "evenue +anagement engine when to apply a contingency. hey are defined in the
"evenue +anagement %uper >ser responsibility &"evenue ,ontingencies P (ssignment "ules'.

he -eneral )nformation *one contains the name of your rule and the contingency to apply. he ,riteria *one
contains the conditions that determine when to apply this assignment rule. )n the picture above, the rule is
applied if the Bill o ,ustomer is in <0alton ,orporation=. 4ote that the rule can be updated to include additional
values. he ,ondition supports )n or 4ot )n.

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+ultiple conditions can be specified. he rule supports <+atch (ll ,riteria=, i.e. every condition must be true, or
<+atch (ny ,riteria=, i.e. the rule will be applied if any one of the conditions is true. o specify a 2
nd
condition
select a 2
nd
parameter, then clic? <(dd ,riteria=.

)f the parameters provided by #racle are not enough, there is a tab where you can define up to 17 additional
parameters, however at the time of this paper, the form does not wor? and there is no documentation on this.
#racle has registered the bug 19911L9L for this issue. he priority for this bug is A3 and thus may never be fi!ed. )f
your company has a need to create assignment rules based on additional parameters, please attach your business
case to this bug and as? to have the priority escalated to A2.

Assinment Rule !est #ases
#n the (ssignment "ules screen, there is a Best ,asesC tab. his allows you to test your rules to see if/how they
would be applied based on entered criteria.

,lic? the B,reate estC button to create a new test. $nter a name for your test at the top, then a value for one or
more of the parameters. ,lic? <-et "esult= to have #racle provide the e!pected result &this in effect runs the test',
or <(dd Halues= to select the assignment rule&s' you e!pect to be returned. ,lic? (pply when you are finished.
4ote that if you specify a value and e!pect no values to be returned, when you clic? -et "esults, you=ll get the
message Bhe rule engine has returned the default value associated with the rule ob/ect because the criteria
parameter values you have supplied do not match to any rules defined for this rule ob/ectC. he test can still be
saved, it will have an e!pected result of BnullC and running the test will be considered successful if null is indeed
returned.

o run a specific test, clic? the bo! ne!t to the test name and clic? B,reate estC. o run all tests, clic? "un (ll
ests.
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$o% does it "or&'

)f Aolicies are defined, or contingencies are assigned to transaction lines, the "evenue +anagement $ngine
determines whether revenue should be recogni*ed or deferred. his $ngine is invo?ed when completing a manual
invoice or importing an invoice. 4ote that it is still the accounting process that creates the actual distributions
either by (uto)nvoice &for invoices without rules' or by the "evenue "ecognition program &for invoices with rules'.

,ontingencies cannot be manually applied to an invoice using the transaction wor?bench. Eowever they can be
added if the invoice is created through (uto)nvoice via entries in the ("O)4$"G(,$O,#4%O(.. table. %ee +#%
note 1137683.1 B>nderstanding and roubleshooting $vent:Based "evenue +anagementC for e!planation of this
process and the tables involved.

he "evenue +anagement $ngine will not analy*e collectability for invoices that have deferred accounting rules.
Gor this type of invoice, the "evenue (ccounting +anagement &"(+' wi*ard &discussed later in this paper' must be
used.

,ontingencies will stop recognition of revenue until the contingency is removed or it e!pires. he concurrent
program B"evenue ,ontingency (naly*erC must be run to periodically monitor contingencies and evaluate whether
they have e!pired or an event has occurred that removes the contingency. )n addition to any schedules set in the
concurrent manager, this program runs automatically when %ubmit &not ,reate' (ccounting is run.
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)f the contingency requires payment to be made, the "evenue ,ontingency (naly*er recogni*es the revenue in
proportion to the amount of the invoice that is paid. his proportion is made to all lines with a payment:based
contingency. 4ote that miscellaneous receipts have no impact on revenue recognition.

)f any manual deferment or recognition has been made for an invoice, the "evenue ,ontingency (naly*e will not
process that transaction. (ny remaining revenue recognition will have to be made manually.

he (ccount "eceivable >sers -uide, ,hapter 3, contains multiple e!amples of how/when revenue is recogni*ed
based on the rules and contingencies applied and the receipt of cash or passage of time.

$o% can I (onitor %hat is $a))enin'
#racle provides a screen and one report to assist in monitoring the application and removal of contingencies. 11i
had a couple of additional reports, but they have been disabled for "12. +#% note 111388L.1 B"12 )s here (ny
%tandard "eports o )dentify Eow +uch "evenue "ecogni*ed (nd/#r 3eferred )n (" )nvoicesC states Bhere is Q
no seeded report availableC. +#% note 11216II.1 B>nderstanding and roubleshooting "evenue "ecognition in
#racle "eceivablesC and 1137683.1 B>nderstanding and roubleshooting $vent:Based "evenue +anagementC and
111863I.1 BEow to %etup and roubleshoot )nvoicing "ules and (ccounting "ulesC contain information about the
underlying tables which can enable you to write your own reports.

he ,ontingency:Based 3eferred "evenue "eport displays the current deferred revenue and contingency statuses
for each invoice that has deferred revenue. his report will e!clude invoices that are assigned deferred accounting
rules and invoices whose revenue was originally deferred, but which has since been removed from further
collectability analysis. he following actions constitute removing an invoice from analysis1
+anually ad/usting revenue using the "evenue (ccounting +anagement &"(+' wi*ard
(d/usting the invoice when the -. (ccount %ource for the specified ad/ustment activity is "evenue on
)nvoice
+odifying distributions in the ransaction wor?bench by changing the distribution to a revenue account
or by rerunning (uto(ccounting after modifying sales credits in the %ales ,redits window &it is better to
use the "(+ wi*ard to perform sales credit ad/ustments'
)ncompleting the invoice

he >sers -uide e!plains the impact of applying a credit memo or reversing a receipt on an invoice that had
contingencies applied and provides several e!amples.

)n addition to the reports, there is the "evenue (ccounting and %ales ,redit screen. his is accessible from the
"eceivables +anager responsibility &,ontrol P (ccounting P "evenue (ccounting'. $nter the search criteria and
clic? Gind. 0hen the screen returns you can see the accounting for the lines &even when %ubmit (ccounting has
not been run', the sales credits and if contingencies were applied, which contingencies.

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)n addition to providing a view of the invoice line distributions, the sales credits, and line revenue contingencies,
this screen also provides a mechanism to manually remove the contingency and thus recogni*e the revenue. hus
the screens invo?ed by the +anage "evenue button are the "(+ &"evenue (ccounting +anagement' wi*ard.

)f you want to provide inquiry capability but not access to the "(+ wi*ard, use a personali*ation to avoid
displaying this button &and the +anage %ales ,redits button'.

Revenue Accounting Manageent !RAM" Wi#ard
he "(+ 0i*ard is used to1
(d/ust revenue
(d/ust sales credits
(d/ust contingency e!piration dates
"ecord early customer acceptances or customer acceptances where #rder +anagement isn=t used

)n order to use this wi*ard to ad/ust revenue, the B"equire %alespersonC system option must be enabled. )f the
only reason for enabling this option is to use this wi*ard, then all invoices can use the seeded salesperson B4o
%ales ,reditC. 0hile a salesperson is now required, it is not required to derive any segment in the accounting
Gle!field &using (uto(ccounting' from the salesperson table. (dditionally, "evenue (d/ustment "eason .oo?up
,odes must be defined. #racle seeds 3 codes, but additional ones can be added.

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he "(+ wi*ard will not allow ad/ustments to any transaction with )nvoice/(ccounting rules until "evenue
"ecognition has been run &the button doesn=t display'.

he "(+ wi*ard can be used to ad/ust on:account credit memos if the profile option B("1 >ser invoice (ccounting
for creditC is set to 4o. )f this profile option is set to Fes or the credit memo has been applied, the "(+ wi*ard
cannot be used &note, applied credit memos recogni*e revenue in the same proportion as the invoice to which
they are applied'.

(fter the B(d/ust "evenueC portion of the "(+ wi*ard is used, the transaction is no longer eligible for automatic
revenue recognition. hus if the ad/ustment did not recogni*e all the revenue, the wi*ard will be required to
recogni*e the remaining revenue. (dditionally, the program that recogni*es the e!piration of the contingencies
will no longer evaluate these transactions or the contingencies applied to these transactions.

Exam)le * Record #ustomer Acce)tance
)n order to show how this wi*ard wor?s, let=s first show the invoice.

(nd the (ccounting "ule

"emember to specify the )nvoicing rule before clic?ing the .ine )tems button. (nd because the )nvoicing "ule was
specified, the (ccounting "ule became a required field.
%pecify
)nvoicing
"ule
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,lic?ing on the 3istributions tab shows the Bplace holdersC because "evenue "ecognition has not been run.

"un "evenue "ecognition.

(fter running "evenue "ecognition, returning to the ransactions 0or?bench, 3istributions tab shows1

3etail
%ummary
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%o if the rule was B)mmediateC, why is revenue still deferredR he (ssignment rule defined earlier placed a
contingency on the line. his can be seen from the "evenue (ccounting page &or the ,ontingency Based 3eferred
"evenue "eport'.

,ustomer (cceptances can be recorded using the "(+ wi*ard. (s stated earlier, the "(+ wi*ard is accessed by
pushing the B+anage "evenueC button on the "evenue (ccounting and %ales ,redit screen. 0hen the button is
clic?ed, the +anage "evenue %tep 1 screen shows I choices1
+odify "evenue ,ontingencies
>nschedule "evenue
%chedule "evenue
"ecord (cceptance

,lic?ing <"ecord (cceptance= and clic?ing ne!t shows the %tep 2 screen. )n step 2, you select whether you want to
recogni*e all lines or a specific item or line. Fou also enter the -. 3ate and can enter a comment as to why you are
recording the acceptance.

,lic?ing 4e!t shows the lines that will be accepted based on the criteria entered in %tep 2. ,lic? Ginish.
Page 20 of 29


he screen now shows the lines and the proposed distributions with revenue recorded.

Fou can select the .ine "evenue ,ontingencies option and see the contingency removal and date.

Fou must clic? %ave to record the change. Fou can clic? 3iscard and the transaction will revert to the state prior to
starting the wi*ard.

Page 21 of 29

Exam)le * Ad+ust #ontinency
he )nvoice and linesQ &this time no )nvoicing / (ccounting "ule was entered'

(nd the assignment rule that placed the contingency.

Because there was no )nvoicing "ule, "evenue "ecognition does not have to be run in order to display the
B+anage "evenueC button.

his time, after clic?ing the B+anage "evenueC button, choose B+anage "evenue ,ontingenciesC. his time the
form displays all the transaction lines with the contingency applied $stimated $!piration 3ate &and 4um 3ays'.
(d/ust either the 4umber of 3ays or the $stimated $!piration 3ate. ,lic? Ginish.
Page 22 of 29


Because this does not remove the contingency, you will get the following message &the first picture is from 12.2.3,
the second picture is from 12.1.3' indicating that changing the date does not allow revenue to be scheduled. his
will happen even if you enter today=s date. Fou will have to run the ,ontingency (naly*er to remove the
contingency &and recogni*e the revenue'. %o clic? Fes to accept or 4o or ,ancel to undo your change.

+#% note 1366828.1 B"(+ 0)S("3 "()%)4- )4H(.)3 +$%%(-$C and 1I7L389.1 B"evenue (ccounting 0i*ard
%hows )nvalid +essageC report that there is a bug in 12.1.3 for this form and to apply patch 17235279. he patch
seems to have removed the verbiage for the error message. ( %" has been filed for this, but no solution has been
provided yet.

%o this time, when the form returns to show the BnewC line distributions, there aren=t any as the revenue is still
deferred. Fou still must clic? %ave to save the change to the e!piration date.

Page 23 of 29

Exam)le * Schedule Revenue
+anually recogni*ing revenue can be done for any invoice where it is deferred regardless of why &any (ccounting
"ule or any ,ontingency'. Tuery the invoice in the "evenue (ccounting form. ,hoose the <+anage "evenue=
button again. his time clic? B%chedule "evenueC, then 4e!t. %tep 2 as?s if you want to credit a specific
salesperson. Fou can select the salesperson or clic? 4e!t &and it will use the salesperson on the invoice'. #n %tep 3,
select B(ll .inesC, a specific line, a specific item or item category and clic? 4e!t.

#n %tep 5, ,lic? B(ll (d/ustable "evenueC, or enter a D to be applied to all selected lines, or enter an amount equal
to or less than the (d/ustable "evenue total. ,lic? 4e!t. %tep 5 provides the ability to enter the -. date for the
recognition, a reason, and comments. ,lic? Ginish.

(gain the "esults page shows. ,lic? %ave to commit your changes or ,ancel to discard your changes and start over.
Page 24 of 29


0hen the form returns, you can clic? the (ctions Eistory tab and see your actions.

Fou can also return to the ransaction wor?bench and see the recogni*ed revenue from the 3istributions tab.
Eowever, the reason and comments are not reflected here.
Page 25 of 29


$ost o% &oods Sold ' $(&S
)f you are running #racle #rder +anagement,
"elease 12 will recogni*e ,#-% at the same
time as revenue &+atching Arinciple'. his
applies to1
%ales orders of both non:configurable
and configurable items &Aic?:o:#rder and
(ssemble:o:#rder'
%ales orders from customer facing op
units where drop shipment is used when the
new accounting flow introduced in 11.5.17 is
used
"+(s that reference a sales order
whose ,#-% is deferred &the "+( will maintain
the same ,#-%/3eferred ,#-% ratio'

Eow to manage deferred ,#-% happens during the B%# )ssue transactionC. )f the %$..)4-O#> equals the
%E)AA)4-O#>, the deferred ,#-% account is used and ,#-% is accounted when revenue recognition happens. )f
the %$..)4-O#> is 4# equal to the %E)AA)4-O#>, then if an intercompany flow e!ists, #racle chec?s if
B(dvanced (ccountingC is enabled. )f so, then the deferred ,#-% account is used otherwise the ,#-% account is
used.

4ote that 3eferred ,#-% cannot be customi*ed li?e ,#-%.

he 3eferred ,#-% account is set at the )nventory #rg level. he navigation from the )nventory user is1 %etup P
#rgani*ations P Aarameters. %elect the B#ther (ccountsC tab. )f upgrading from 11i, this account will be
populated with the ,#-% account, but it can be changed at any time.

)nvoicing and (ccounting "ules are set at the item level on the )nvoicing tab.
Page 26 of 29


!he Process
(ssume the customer orders an item with material on:hand, a defined cost, and the item has an assigned
accounting rule of B3 +onths, Gi!ed, 4on 3eferredC. 0hen the order is boo?ed, pic?ed, and ship confirmed, the
accounting for the %# issue is a credit to the )nventory Haluation (ccount and a debit to the 3eferred ,#-%
account &because of the inventory rule'. (utoinvoice creates the transaction in "eceivables and brings over the
accounting rule for the line referencing the item. 0hen revenue recognition is run, assuming there are no
assignment rules that would place a contingency on the line, accounting is generated to recogni*ed 1/3 of the
revenue each month.

,#-% will follow the revenue recognition by running the ,ollect "evenue "ecognition )nformation program to
detect changes in revenue recognition, then running -enerate ,#-% "ecognition $vents. he second program
creates transactions if the ,#-% recognition doesn=t match the revenue recognition. Both of these programs are
concurrent programs that are initiated from the ,#-% "ecognition menu from the ,ost +anagement
responsibility. hese programs assume that the ,ost +anager has costed all the transactions. )f not, then run
B"ecord #rder +anagement ransactionsC

(fter running the programs, &from ,ost +anagement, Hiew ransactions P +aterial ransactions, 3istributions
ab' view the results in the +aterial ransactions screen. Fou +>% clic? the B)nclude .ogical ransactionsC
Page 27 of 29

chec?bo! in the Gind +aterial ransactions form or only the 3eferred ,#-% will show. ( credit of 1/3 will be
charged to the 3eferred ,#-% account and a debit of 1/3 will be charged to the ,#-% account.

here are two ,#-% "evenue +atching "eports, both available from the ,ost +anagement responsibility. Both
display $arned/>nearned "evenue and ,#-% amounts and accounts. Both have the parameter B3isplay +atch
.inesC. )f you specify Fes, the report is restricted to matched lines. )f you specify 4o, the report shows both
matched and unmatched. he Aeriodic report adds three additional parameters, .egal $ntity, ,ost ype, and ,ost
-roup.

+#% note 137L678.1 B,#-% 3ataflow and 3iagnostics UHideoVC shows the following diagram to e!plain the
process.
Page 28 of 29


Where to )ind More In%oration
Gor "evenue "ecognition
+#% note 1137683.1 W>nderstanding and roubleshooting $vent:Based "evenue +anagementC
+#% note 11216II.1 B>nderstanding and roubleshooting "evenue "ecognition in #racle "eceivablesC
+#% note 111863I.1 BEow o %etup (nd roubleshoot )nvoicing "ules and (ccounting "ulesC
+#% note 175618I.1 BEow to est <$!plicit (cceptance= ,ontingency and <,ustomer (cceptance= "emoval
$ventR (n $vent:Based "evenue +anagement $!ample UHideoVC
+#% note 13966L2.1 B>nable o (dd ,redit +emo ransaction ype )n "evenue ,ontingency (ssignment
"ules in "12C
+#% note 17855L2.1 BEow to ,reate and then "emove a Aayment:Base ,ontingencyR. (n $!ample with
,reditworthiness ,ontingency and "eceipt (pplication "emoval $vent.C
+#% note 979L75.1 B4eed o Know Eow ransactions >sing Aayment:Based "evenue +anagement (re
)dentifiedC
+#% note 58I195.1 B0here is the ,ontingency BAroof of 3eliveryC $ntered in #racle "eceivables &("'RC
+#% note 175618I.1 BEow to est <$!plicit (cceptance= ,ontingency and <,ustomer (cceptance= "emoval
$ventR (n $vent:Based "evenue +anagement $!ample UHideoVC
Page 29 of 29

+#% note 111388L.1 B"12 )s here (ny %tandard "eports o )dentify Eow +uch "evenue "ecogni*ed
(nd/#r 3eferred )n (" )nvoicesC
"eceivables >sers -uide "elease 12.1 &Aart 4o. $13822:72', ,hapter 3 2 "evenue +anagement
"eceivables >sers -uide "elease 12.2 &Aart 4o. $I967I:72', ,hapter 3 2 "evenue +anagement

Gor ,#-%
#racle ,ost +anagement >sers -uide "elease 12.1, ,hapter L 2 "evenue and ,#-% +atching
#racle ,ost +anagement >sers -uide "elease 12.2, ,hapter L 2 "evenue and ,#-% +atching
+#% note 137L678.1 B,#-% 3ataflow and 3iagnostics UHideoVC
+#% note I188L9.1 B"12 1 3eferred ,#-% (ccountingC
+#% note 58L281.1 B"12 3eferred ,#-%1 4ew Arocess for ,ost of -oods %oldC
+#% note 11132LI.1 BEow # ransfer 3eferred ,#-% o (ctual ,#-% (ccount Gor %hip #nly BusinessC
+#% note 597387.1 B"121 ,an 0e ,ustomi*e he 3eferred ,#-% (ccountRC
+#% note 98L612.1 B,#-% and 3,#-% 0or?flowC
+#% note 187L621.1 BG(T in ,#-#% / 3,#-%C
+#% note 1787272.1 B,#-% and 3,#-% "ecognition (ccounting >seful ipsC
+#% note 131I335.1 B,#-%/ 3eferred ,#-% common problemsC
+#% note 128L115.1 B3eferred ,#-% 4ot ransferring to ,#-% (ccount (fter "unning -enerate ,#-%
"ecognition $ventsC
+#% note 1351L8I.1 B3eferred ,#-% )s By:passed Gor 3irect %hipmentsC

$onclusion
"ecognition of revenue and matching ,#-% to that revenue are governed by accounting principles. he
functionality in "elease 12 is a giant step in compliance to these principles. he functionality is easy to setup and
easy to use. he biggest opportunity for improvement in this area would be to provide some reports to aide in
reconciliation.

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Copyright 2014 by Karen Brownfield COLLABORATE 14

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