RR Best Practices V16 Part1

SAP ERP SD REVENUERECOGNITION -

BEST PRACTICESPART 1

Knowledge Document

Version 1.6

SAP AG Page: 2Of: 53

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S AP ERP SDREVENUE RECOGNIT ION -

BEST PRACTICES

K N O W L E D G E D O C U M E N T(based on ERP Release ECC 6.0)

Release:Version 1.6, August 2009

Issued by:

SAP AG69190 WalldorfGermany

Revenue Recognition - Best Practices - Part 1 Table of ContentsKnowledge Document


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1 INTRODUCTION......................................................................................................5

1.1 General recommendations..................................................................................................................5

1.2 Out of scope ........................................................................................................................................6

2 DESCRIPTION OF BUSINESS AREA.....................................................................9

2.1 Available methods...............................................................................................................................9

2.2 The trigger and impact of the methods ..............................................................................................9

2.3 Typical Core Business Processes using the methods ..........................................................................9

2.4 Business Process Specific Information .............................................................................................10

3 IMPLEMENTING REVENUE RECOGNITION........................................................11

3.1 Getting started ERP SD Revenue Recognition.................................................................................113.1.1 Required releases and support packages..........................................................................................113.1.2 Provided functions .........................................................................................................................123.1.3 Available documentation................................................................................................................13

3.2 Starting with customizing.................................................................................................................143.2.1 Global information.........................................................................................................................143.2.2 Pre-steps ........................................................................................................................................14

3.3 Customizing FI accounts and their settings .....................................................................................153.3.1 Unbilled receivable account and deferred revenue account..............................................................153.3.2 Revenue account ............................................................................................................................19

3.4 SD-Customizing ................................................................................................................................203.4.1 SD item categories and their settings ..............................................................................................203.4.2 Revenue recognition category on item category level ......................................................................213.4.3 Proposed start date for accrual period .............................................................................................233.4.4 Revenue distribution type...............................................................................................................233.4.5 Revenue event................................................................................................................................243.4.6 Customizing account determination................................................................................................253.4.7 Additional customizing settings......................................................................................................26

4 DESCRIPTION OF CORE BUSINESS PROCESSES ...........................................27

4.1 Standard Revenue Recognition at time of billing.............................................................................284.1.1 General Information .......................................................................................................................284.1.2 Business steps overview and process description ............................................................................28

4.2 Time based revenue recognition (‘A’) ..............................................................................................294.2.1 General Information .......................................................................................................................294.2.2 Business steps overview and process description ............................................................................29

Process 2 – time based with VF44 as first ................................................................................................29Process 3 – time based with invoice as first..............................................................................................30

4.2.3 Variations of the process ................................................................................................................314.2.4 Important remarks..........................................................................................................................31

4.3 Service based revenue recognition (‘B’) ...........................................................................................324.3.1 General Information .......................................................................................................................324.3.2 Business steps overview and process description ............................................................................32

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Process 4 – service based with VF44 as first ............................................................................................32Process 5 – service based with invoice as first..........................................................................................33


4.4 Service based revenue recognition (‘B’) in contract with call-off order ..........................................354.4.1 General Information .......................................................................................................................354.4.2 Business steps overview and process description ............................................................................35

Process 6 – service based with VF44 as first ............................................................................................35Process 7 – service based with invoice as first..........................................................................................36


4.5 Time based and billing related revenue recognition (‘D’)................................................................384.5.1 General Information .......................................................................................................................384.5.2 Business steps overview and process description ............................................................................384.5.3 Variations of the process ................................................................................................................394.5.4 Important remarks..........................................................................................................................39

4.6 Credit/debit memo processing WITH a credit/debit memo request (‘A’ or ‘B’).............................394.6.1 General Information .......................................................................................................................394.6.2 Business steps overview and process description ............................................................................40

Process 9 – time based / service based with VF44 as first.........................................................................40Process 10 – time based / service based with invoice as first.....................................................................41


4.7 Credit/debit memo processing WITH a credit/debit memo request (‘D’) .......................................424.7.1 General Information .......................................................................................................................424.7.2 Business steps overview and process description ............................................................................434.7.3 Variations of the process ................................................................................................................434.7.4 Important remarks..........................................................................................................................44

4.8 Credit/debit memo processing with reference to a preceding document (‘F’).................................444.8.1 General Information .......................................................................................................................444.8.2 Business steps overview and process description ............................................................................454.8.3 Variations of the process ................................................................................................................454.8.4 Important remarks..........................................................................................................................45

4.9 Credit/debit memo processing WITHOUT a credit/debit memo request (‘A’ or ‘B’).....................464.9.1 General Information .......................................................................................................................464.9.2 Business steps overview and process description ............................................................................474.9.3 Variations of the process ................................................................................................................474.9.4 Important remarks..........................................................................................................................48

4.10 Return processing with reference to an order (‘B’) .........................................................................484.10.1 General Information ..................................................................................................................484.10.2 Business steps overview and process description........................................................................49

Process 14 – service based with VF44 as first ..........................................................................................49Process 15 – service based with invoice as first........................................................................................50

4.10.3 Variations of the process............................................................................................................514.10.4 Important remarks .....................................................................................................................51

4.11 Return processing with reference to a contract and call-off order (‘B’).......................................514.11.1 General Information ..................................................................................................................514.11.2 Business steps overview and process description........................................................................524.11.3 Variations of the process............................................................................................................534.11.4 Important remarks .....................................................................................................................53

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1 Introduction

1.1 General recommendations

In order to comply with the latest bookkeeping principles and current regulations, like Generally AcceptedAccounting Principles (US-GAAP), International Accounting Standards (IAS) / Financial ReportingStandards (FRS), as well as the Sarbanes-Oxley Act, SAP provides some general recommendations andbest practices for customers using SAP ERP revenue recognition in the Sales and Distributioncomponent (SD). In the whole document the term ‘revenue recognition’ is used instead of SAP ERP SDrevenue recognition.

If customers want to use the revenue recognition functionality in their productiveenvironment, the implementation must be subject to a pre go-live assessment toavoid a negative impact on the financial statement. This assessment is completelyfree of charge. In other words, the customer will have to ask explicit permission fromSAP in order to use this functionality (detailed information is provided in SAP-notes768561 and 779366).

As revenue recognition provides a data stream into the financial system, the setup ofthe function is not only an SD task. FI consultants with experience in the area ofBalance Sheet and P&L customizing have to setup the account assignment usingSAP Best Practices and need to review the processes that are customized in the SDarea.

Furthermore, the entire revenue recognition process should be approved by theresponsible Head of Accounting and, if necessary, reviewed by the external auditorof the company.

Revenue recognition needs to be implemented by SAP-certified SD- and FI-Consultants.

To make sure that compliance with the latest requirements is possible, alwaysimplement the latest versions of the SD module, especially the latest notes onrevenue recognition. Please have a look to the composite SAP-note 1323315 (orupdated one).In addition, newly created notes are contained in the monthly TOP NOTES list that issent out.

Also, SAP always recommends the application of the latest support package.

Because of the nature of the revenue recognition function, it is necessary to monitorcontinuously (at a minimum monthly) the results by using the transaction VF45 andVF48, which delivers a process view of SD and FI and also by using transactionVF47, which provides a more technical view.

To implement revenue recognition in already existing processes (transfers of olddata) a detailed concept creation is necessary. Otherwise data inconsistencies in SDand FI can occur.



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Program modifications in a revenue recognition relevant process are discouragedbecause they may have unexpected effects and may result in an incorrect datastream for FI. Any modifications made must be very closely monitored to preventany negative impacts to the revenue recognition process. Additionally modificationshave to be reviewed to check whether they are still in line with legal financeguidelines and regulations.

If the revenue recognition functionality is activated once in the productive systemlandscape, a deactivation has to be declined due to the direct impact to theaccounting and the danger of data inconsistencies.

Always get the latest version of the Revenue Recognition Best Practices Guide. Thedocument is attached to SAP-note 1172799.In addition to the 'Best Practice' document, an eLearning course for the SAP ERPSD Revenue Recognition function is available with the following title:

SCM653: Sales and Distribution Revenue Recognition SCM654: Advanced Revenue Recognition

These eLearning courses can be found under www.sap.com/education.

If IS-Media solution is used, there is a Revenue Recognition Best Practices Guideavailable for this industry solution.

The comments in these documents are binding for all customers using the SAP ERP revenue recognitionfunctionality and the outlined recommendations have to be implemented.

1.2 Out of scope

The SAP ERP SD Revenue Recognition functionality based on an SAP ERP system and on pure ERPcore business processes.

Here the important general preconditions and limitation for the use of the ERP SD Revenue Recognitionfunctionality is provided:

The SAP ERP SD Revenue Recognition functionality has been designed to feed andinteract with a classic SAP ERP financial accounting module. External and third-party accounting back ends are not covered and supported by SAP.

The integration of revenue recognition with other solutions of SAPs business suites(e.g. SAP CRM) as well as the integration with SAPs industry solutions (e.g. IS-OIL,IS-ADEC-BOQ) is not validated and released. In case you plan to combine SAPERP SD Revenue Recognition with another solution please address this need viathe SAP User Groups or the responsible SAP Solution Manager.In case you don’t know who to contact you can create a service ticket on componentSD-BIL-RR. SAP Support will then forward your request to the responsible person.

http://www.sap.com/education.



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Also there are functional constraints regarding the pure ERP core business processes and functions:

The Scheduling agreement function is not possible in combination with the revenuerecognition functionality.

The Resource Related Billing function (DP90) is not possible in combination with therevenue recognition functionality.

Taxes meaning all tax values cannot be accrued and so included into the revenuerecognition process.

Transfer prices cannot be accrued and so included into the revenue recognitionprocess.

Inter-company processing, in other words, the creation and posting of an internalbilling document / the internal part of the process cannot be included into therevenue recognition process.

The down payment data / the down payment request cannot be included it in therevenue recognition process.

The Treasury hedging functionality (FI-CA) is not possible in combination with therevenue recognition functionality.

The Fond based accounting functionality (PSM-FA) is not possible in combinationwith the revenue recognition functionality.

To use the function of posting to ‘parallel ledger’ within the New G/L and to use therevenue recognition functionality is possible. But the posting to ‘parallel ledger’ is notavailable for these processes that are relevant to revenue recognition. This meansthat the values and times in the revenue postings for a process that is relevant torevenue recognition are identical for all ledgers.

The changing of the account settings in FI should be made in arrangement withSAP.

The use a fiscal year variant with shortened fiscal year should be made inarrangement with SAP. There is no standard process that guarantees a smoothprocess flow of all revenue recognition processes.

The changing of document currency in order/contract after invoicing or revenuerecognition is not possible.

A statistics update with the postings of revenues (using transaction VF44/VF46) isnot possible.

Migration of revenue recognition data from a former system to SAP ERP.Every migration is individual and there is no standard process or standard toolavailable for this purpose. An experienced consultant should be contacted tostreamline the data migration (see SAP-note 985753).

Deactivation of revenue recognition.Deactivation of revenue recognition should be performed by an experiencedconsultant. There is no standard process or standard tool available for this purpose.The following information is important to know:

o Before the revenue recognition is deactivated all open revenue recognitionprocesses have to be completed and all revenue recognition data must havestatus C. Otherwise the whole SD data cannot be archived.

o After the deactivation of revenue recognition new SD item categories shouldbe used instead of changing the revenue recognition category of the existingSD item categories.

The “functional constraints for revenue recognition” are also mentioned in SAP-note 678260. This note iscontinuously updated.



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The provided list for the ERP constraints is not raising the claim for completeness and there can bescenarios in your landscape which are not especially described or included in this document. In this caseplease contact SAP and ask for an assessment (see SAP-note 820417).



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2 Description of Business Area

Many companies require that revenues are posted according to a time period. This means that therevenues must be realized in the posting period in which the service was carried out, and not in theposting period in which the billing document was set up. The revenue recognition function in the SAPERP system helps you to fulfill these requirements and separates the revenue recognition process fromthe billing process. The ERP system offers a flexible solution to companies using various methods ofrevenue recognition.

2.1 Available methods

Revenue recognition at the point of billing (standard method)

Time-related revenue recognition (the revenues are realized between specific setdates)

Service-related revenue recognition (the revenues are realized on the basis of aspecific event, e.g. the goods issue for a delivery)

Credit/Debit memo request with reference to preceding document

Service based revenue recognition, billing related (only for IS-M solution)

2.2 The trigger and impact of the methods

Revenue recognition is set up and initialized by the Sales and Distribution (SD)processes and therefore the revenue recognition method is assigned to the itemcategory in the customizing of the SD module.

Revenue recognition impacts the Financial Accounting by the account postings andtherefore two additional accounts (balance sheet accounts) have to be created in theFI module. The accounts are: deferred revenue account and unbilled receivableaccount. Detailed information is provided by note 777996.

2.3 Typical Core Business Processes using the methods

Time based revenue recognition e.g. for rental contracts valid for a long time with aperiodic billing plan.

Service based revenue recognition e.g. a service contract with a related call offorder, where services are included and a partial billing plan is assigned.

Service based revenue recognition e.g. a sales order is delivered in a totally anothertime period than the invoice is created and released.

Time based and billing related revenue recognition e.g. the invoicing has to be donebefore revenues may be realized.



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This document mainly deals with the non-standard revenue recognition since only for these the specialrevenue recognition functionality is relevant. Further, in this document, the term ‘revenue recognition’refers to the use of a revenue recognition method other than the standard revenue recognition.

2.4 Business Process Specific Information

The revenue recognition process is included in standard SD processes and is usedin most cases with the billing plan functionality.

The order or contract has to include a billing plan or at least contract data, if you areusing time related revenue recognition (A or D).

The document type for the revenue recognition document is 'RV'. This assignment ishard-coded and an internal number range is mandatory.

Revenues aren’t posted to the G/L account when releasing the invoice toaccounting.

With the revenue recognition run (VF44), financial accounting documents arecreated and the revenues will be realized. This is possible after the process isinitialized (depending on the revenue recognition method).

With the cancellation of the revenue recognition (VF46) the revenue recognitionposting can be reversed, e.g. when revenues have been realized in error. Therevenue recognition cancellation is not a real cancellation in the sense of a reverseposting. The balances on the accounts at the creation date of the cancellation areused as a basis.

Both transactions VF44 and VF46 can be executed in the background. The systemdisplays the relevant icon on the screen. Alternatively the relevant reports(SDRRAV01 for transaction VF44 and SDRRAV05 for transaction VF46) can bescheduled.The previous reports (SDERAV01 for transaction VF44 and SDERAV05 fortransaction VF46) are no longer valid.

An update of the relevant sales document is necessary for the re-determination ofthe revenue data. For this update transaction VF42 in dialog mode can be called orreport SDRRAV54 in the background can be scheduled.The previous report ZZ_SALES_DOC_CHANGE is no longer valid.

A function of revenue recognition is the grouping and monitoring of revenues in twoadditional general ledger accounts, which are:

o Unbilled receivables account (U/R account)

o Deferred revenues account (D/R account)

You can see in these accounts whether revenue has been realized, but not yet taken into account in the invoice, or have been taken into account in the invoice, but not yet realized.

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3 Implementing Revenue Recognition

3.1 Getting started ERP SD Revenue Recognition

3.1.1 Required releases and support packages

When you want to start with revenue recognition, the very first step to do is, look at your system-status!

Do not start implementing or customizing revenue recognition, whenyou don’t have the latest support package for your SAP release.

Recommended releases and support packages are (as for 3rd quarter of 2009):

ERP 4.6C Out of Mainstream MaintenanceExtended Maintenance is needed and

at least SP 56 has to be implemented.

ERP 4.7 Enterprise Out of Mainstream Maintenance

Extended Maintenance is needed andat least SP 30 has to be implemented.

ECC 5.0 SP 19

ECC 6.0 SP 12



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3.1.2 Provided functions

Missing revenue recognition functions resulting in processing- and program-errors made it necessary toenhance parts of the SAP ERP SD Revenue Recognition.

Therefore enhanced functions, associated process changes, as well as corrections for programs are donecontinuously. Use of the provided enhancements depends on the implemented release.

Here is a short summary of the technical and program enhancements available with ERP release 4.6C:

An update of the relevant sales document is necessary for the re-determination ofthe revenue recognition data. For this, the update transaction VF42 in dialog modecan be called or report SDRRAV54 in the background can be scheduled.

Authorization object for the revenue recognition area is available. Please see SAP-note 1055696.

For transactions VF44 and VF46 a changing of the processing logic with referenceto lock logic is programmed. This allows VF44 or VF46 and billing to run in parallel.Furthermore, the complete ROLLBACK WORK no longer occurs. At the same timethe user interface has been improved. The user now receives exact informationabout which revenues are to be posted. After posting, the system displays thecurrent values on the screen. Both transaction VF44 and VF46 can be executed inthe background. The system displays the relevant icon on the screen. Alternativelythe relevant reports (SDRRAV01 for transaction VF44 and SDRRAV05 fortransaction VF46) can be scheduled.

For VF46 a changing of the processing logic with reference to the cancellationupdating is programmed. This allows more transparency due to the original andcancellation lines in the revenue table is updated and an additional revenue line iscreated.

A new revenue recognition view with different selection criteria to display the postedrevenue lines is available. For this view transaction VF43 (report SDRRAV50) isprovided.

A document summarization is available. With this solution a document can betransferred to accounting including a much higher number of revenue lines to beposted. These are then summarized in financial accounting and a collapsed financialaccounting document is created.

A manual completion of contracts is possible and, if needed, a correction line iscreated. Previously the system did not define when a process was completed.

For the solution to be reliable with the requirement FASB 52 (Financial AccountingStandards Board Statement 52), which requires a fixed exchange rate for the entireaccrual period, is provided.

New DDIC fields have been added for executing the new functions.

For transaction VF46 and VF48 monitoring reports enhancements are available.

Archiving for revenue recognition tables is available.

Here is a short summary of the technical and program enhancements available with ERP release ECC6.0:

The POD - 'Proof of Delivery’ function is available.

A revenue block is available for the revenue recognition. Two new push buttons intransaction VF44 allows to set or delete a block indicator.



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3.1.3 Available documentation

Before starting with the implementation of revenue recognition functionality, it is essential to know whichprocesses are supported by SAP-functionality.

The supported processes and functions are described in the document “Best Practices for ERP SDRevenue Recognition”.

This document contains detailed information about:

Necessary Customizing settings

Supported processes and scenarios

Limitations and restrictions placed on the solutions offered

Recommendations for monitoring the revenue recognition process

A guide for implementation

You will find the latest version of this document attached to SAP-note 1172799.

In addition to the 'Best Practices' document, eLearning courses for the SAP ERP SD RevenueRecognition function are available with the following title:

SCM653: Sales and Distribution Revenue Recognition

SCM654: Advanced Revenue Recognition

These eLearning courses can be found under www.sap.com/education.

Also look at the ‘prerequisites for revenue recognition’ mentioned in SAP-note 782758 as well as at the‘implementation guide for revenue recognition’ mentioned in SAP-note 820417.

In order to comply with the latest accounting principles and current financial regulations, like 'GenerallyAccepted Accounting Principles' (US-GAAP), 'International Accounting Standards' (IAS) / 'FinancialReporting Standards' (FRS), as well as the 'Sarbanes-Oxley Act', SAP provides some generalrecommendations for customers using Revenue Recognition in the Sales and Distribution component(SD).

Some information from these notes:

The setup of the function is not only an SD task, but also a FI task.

Revenue Recognition needs to be implemented by SAP-certified SD-and FIconsultants.

Program modifications in a revenue recognition relevant process are discouragedbecause they may have unexpected effects and may result in an incorrect datastream for FI.

It is necessary to monitor the Revenue Recognition function monthly, at a minimum,the results by using the transactions VF47 which provides a more technical view asVF45 which delivers a transaction view of SD and FI.

http://www.sap.com/education.



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3.2 Starting with customizing

3.2.1 Global information

When you try to start customizing revenue recognition, you will find that customizing item for revenuerecognition cannot be entered or changed. According to SAP-note 820417 the path on IMG Sales andDistribution -> Basic Functions -> Account Assignment/Costing -> Revenue Recognition -> Set RevenueRecognition for Item Categories is not open for any entering or changing of customizing data.

Usage of SAP ERP SD Revenue Recognition functionality is under a special activation by SAP (see alsoSAP-notes 779366 and 605665).

By releasing the SAP ERP SD Revenue Recognition function separately, we want to ensure thatcustomers who intend to use this function are aware of and agree to the necessary determining factorsand prerequisites.

Despite this special release process, customers are still responsible for setting up, using and operatingthe SAP ERP SD Revenue Recognition function.

SAP-note 1166848 provides an overview of relevant customizing settings.

3.2.2 Pre-steps

For the setup of revenue recognition processes you have to customize:

FI accounts and their settings

SD item categories and their settings

Revenue recognition category on item category level

Account determination

The following accounts are needed for the representation of the revenue recognition process:

Revenue account (recognized revenues)

Receivables account (customer account)

Revenues to be deferred (deferred revenue account or D/R account)

Unbilled receivables (unbilled receivables account or U/R account)

For the revenue account and receivables account you can use the accounts that you used before in theother standard processes. The account of the revenues to be deferred (in the following called D/Raccount) and the account of the unbilled receivables (in the following called U/R account) have to becreated as new accounts.

The U/R account must be different from the D/R account, i.e. different accountnumbers must be used. Only this way the posting process of the revenue recognitioncan be monitored.

An account number is never a revenue account that is used for the accrualsaccounts (U/R and D/R accounts).



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3.3 Customizing FI accounts and their settings

3.3.1 Unbilled receivable account and deferred revenue account

For the unbilled receivable account and for the deferred revenue account the following settings in FI mustbe maintained:

Transaction: FS00

Path: Financial Accounting General Ledger Accounting G/L Accounts Master Records G/L Account Creation and Processing Edit G/L Account (Individual Processing)

Edit G/L Account Centrally

On Tab “Type/Description” the field “Balance sheet account” (SKA1-XBILK) must be set to YES.



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This indicates that the G/L account is managed as a balance sheet account. U/R and D/R accounts haveto be balance sheet accounts, because only these accounts and their balances are carried forward atfiscal year-end.

On Tab “Control data” the following fields have to be filled out:

Field “Only balances in local currency” (SKB1-XSALH) to NO *1)

Field “Tax category” (SKB1-MWSKZ) with + (Only output tax allowed) or * (All tax types allowed) *2)

Field “Posting without tax allowed” (SKB1-XMVNO) to YES *3)

Field “Open item management” (SKB1-XOPVM) to YES *4)

Field “Line item display” (SKB1-XKRES) to YES *5)



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*1) With “no” it indicates that balances are updated not only in local currency when users post itemsto this account. So the revenue recognition processes are able to post in different currencies.

*2) Possible entries:

Here just “+” or “*” are used.

*3) With “yes” it indicates that the account can still be posted, even if a tax code has not beenentered. In revenue recognition it should be possible to post both, taxable and non-taxable items,to an account. For example, you would usually set up a separate tax code for the non-taxabletransactions. When taxes are entered using jurisdiction codes, however, this separate tax codecannot be used since jurisdiction codes cannot be specified for foreign customers. In this case,you allow users to post items without tax codes in the corresponding expense and revenueaccounts.

*4) With “yes” it determines that open items are managed for this account. Items posted to accountsmanaged on an open item basis are marked as open or cleared. The balance of these accountsis always equal to the balance of the open items. Set up accounts with open item management ifoffsetting entries are to be assigned to the postings made to these accounts. Postings to theseaccounts represent incomplete processes or process-steps.

Be careful when using open item management, because in this case you cannot use documentsummarization.

User-exit xxxxx must be used to set the assignment in the SD invoices.

*5) With “yes” here it indicates that line item display is possible in this account. For line item display,the system stores an entry per line item in an index table which contains the link between lineitem and account.



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On Tab “Create/bank/interest” there is one entry necessary:

Mark field “Post automatically” (SKB1-INTB) with YES.

This mark indicates that this account can only be posted to by the system using account determinationtables. No manual posting is allowed, because manual posting will never change the revenue recognitiontables.



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3.3.2 Revenue account

For the revenue account the following settings must be maintained:

On Tab “Type/description”

Set field “P&L statement acct” (SKA1-XPLACCT) to YES.

On Tab “Control data”

Set the field “Posting without tax allowed” (SKB1-XMVNO) to YES.

Do not select field “Only balances in local crcy” (SKB1-XSALH) – it should always be NO.



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3.4 SD-Customizing

3.4.1 SD item categories and their settings

Normally when you are working with revenue recognition, you are working with SD contracts or customerorders, deliveries and invoices.

So you have to customize these documents.

On sales document header level you have to do just the normal customizing for thesales document types. No additional customizing is necessary for revenuerecognition.

On sales item level, you have to do some customizing, when using revenuerecognition.

When you want to use a billing plan, you have to customize this in your itemcategories.

Transaction : VOV7

Path: Implementation Guide Sales and Distribution Sales Sales Documents SalesDocument Item Define Item Categories



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Field “relev. for billing”:

Use “I” for the document item category if you want to use a billing plan in the sales document.

Field “billing plan type”:

For a billing plan type, choose one of the above types or create your own billing plan type and the use thisone for the item categories. You can create your own billing plan type in customizing via pathImplementation Guide Sales and Distribution Billing Billing Plan Define Billing Plan Types ortransaction OVBI for periodic billing or transaction OVBO for milestone billing.

3.4.2 Revenue recognition category on item category level

You will find this part of customizing at:

Transaction: OVEP

Path: Implementation Guide Sales and Distribution Basic Functions Accountassignment / Costing Revenue Recognition



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Set Revenue Recognition category for Item Categories:

Possible entries for the field “Rev. recognition” are:

How to use this revenue recognition category?

Referring to chapter 4 in this document, where the processes are described, the usage of this category isexplained.

Here is a short summary:

Category Reference Usageblank chapter 4.1 standard revenue recognition at time of billing

A chapter 4.2 time based revenue recognition in contracts/orders

A chapter 4.6 time based revenue recognition in credit/debit memo processingwith memo request

A chapter 4.9 time based revenue recognition in credit/debit memo processingwithout memo request

B chapter 4.3 service based revenue recognition in contracts/orders

B chapter 4.4 service based revenue recognition in contracts with call-off order

B chapter 4.6 service based revenue recognition in credit/debit memoprocessing with memo request

B chapter 4.9 service based revenue recognition in credit/debit memoprocessing without memo request

B chapter 4.10 service based revenue recognition in return processing withreference to an order

B chapter 4.11 service based revenue recognition in return processing withreference to a contract and call-off order

D chapter 4.5 time based and billing related revenue recognition

D chapter 4.7 time based and billing related revenue recognition in credit/debitmemo processing without memo request

F chapter 4.8 credit/debit memo revenue recognition with reference to apreceding document



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3.4.3 Proposed start date for accrual period

You have to customize the accrual start date for revenue recognition category A only by using the sametransaction / path as for customizing the revenue recognition category.

The accrual start date determines the start of the period in which revenues should be recognized.

You have the following options for customizing the accrual start date:

Proposal based on contract start dateRevenue recognition proposes the start date of the sales contract for the item as theaccrual start date.

Proposal based on billing plan start dateRevenue recognition proposes one of the following dates as the accrual start date:

In a milestone billing plan, the billing date of the first milestone.

In a periodic billing plan, the earlier of the following dates:

Billing plan start date

Start date of first settlement period

3.4.4 Revenue distribution type

You can customize the revenue distribution type for revenue recognition category A with periodic billingplan only by using the same transaction / path as for customizing the revenue recognition category.

The revenue recognition distribution gives the possibility of linking the distribution of revenues over theposting periods in the revenue lines to the value distribution of the billing plan dates. This means thateach individual billing plan date is represented in terms of its time period and billing plan value on therelevant posting periods in the revenue lines. So the total accrual value is not distributed evenly across allposting periods.



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The corresponding setting is also saved in the sales document in the VBKD table in the field REVSP andremains intact regardless of later Customizing changes.

You have the following options for customizing the revenue distribution type:

Initial value for the revenue distribution type corresponds to the previous standardbehavior: The total value for this item is evenly distributed across all posting periodsin the revenue lines. Correction values are set in the current period.

Total value linear and adjustment value distributed linearly: The total value for thisitem is evenly distributed across all posting periods in the revenue lines. Correctionvalues are distributed evenly across all open posting periods.

Total value based on billing plan and adjustment value undistributed: The total valuefor this item is distributed in relation to the billing plan across the correspondingposting periods in the revenue lines. Correction values are set in the current period.

Total value based on billing plan and adjustment value distributed linearly: The totalvalue for this item is distributed in relation to the billing plan across thecorresponding posting periods in the revenue lines. Correction values are distributedevenly across all open posting periods.

The revenue distribution type influences the adjustment process depending on the business processes.For example there is a different creation of adjustment lines in case a credit memo request with revenuerecognition category ‘F’ is created in reference to a specific invoice OR in reference to a contract item.

3.4.5 Revenue event

The revenue event enables the revenue recognition meaning that the revenue event determines whichevent or document leads to recognition of the relevant revenues.

You can customize the revenue event for revenue recognition category B with billing plan only.For customizing use the same transaction / path as for customizing the revenue recognition category.Please notice that this customizing setting is available with release ECC 6.0.



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You have the following options for customizing the revenue event:

‘Blank’ Not Event-Related: normal system behavior.

‘A’ Incoming invoice: This revenue event is relevant for third-party businesstransactions. The revenues can be posted after receipt of the incoming invoice fromthe vendor. The revenues depend on the quantities invoiced in the incoming invoice.

‘B’ Acceptance date: The revenues can be posted when the customer acceptancedate is entered.

‘X/Y/Z’ Customer-specific event: The revenues can be posted when a specific eventoccurs, which you can define using the BADI for customer-specific events.

For more information please view SAP-notes 1000830, 1025066, 1120297 and 1125456.

3.4.6 Customizing account determination

Next customizing step is the account determination.

Transaction: VKOA

Path: Implementation Guide Sales and Distribution Basic Functions Accountassignment / Costing Revenue Recognition Maintain Account Determination

In the SD module, both the revenue account and the account for deferred revenue amounts must bemaintained in the revenue account determination. This occurs in customizing transaction according thefollowing example:

Assign G/L accounts for revenues and deferred revenues:



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G/L account no. (SAKN1): revenue account

Provision acc. (SAKN2): D/R account

In the customizing transaction OVUR the account for unbilled receivables (U/R account) has to bemaintained depending on the reconciliation account and the associated chart of accounts:

NonBldRec.: U/R account

There are two possibilities for the determination of the accrual account:

The reconciliation account is taken from the customer master record of the payer.

For the billing type assigned to the sales document, the system checks whether thereconciliation account determination is active. If this is the case, the system performsa reconciliation account determination within the revenue recognition and uses theso determined reconciliation account (see SAP-note 644296).

3.4.7 Additional customizing settings

Beside the mentioned customizing settings relevant for the revenue recognition functionality, the followingcustomizing setting has to be considered to avoid processing errors.

Customizing copy control on item level:

In the customizing transaction VTAA the update indicator for sales document flowhas to be set to ‘X’ so that document flow records are created on item level.

In the customizing transaction VTLA the update indicator for sales document flowhas to be flagged so that document flow records are created on item level.

Customizing incompletion log:

The following customizing settings are required to use an error group in revenue recognition to specify theincompletion and to prevent the system creating subsequent documents. For more information see SAP-note 1265438.

Define a new procedure in the customizing:Path: Sales and Distribution -> Basic Functions -> Log of Incomplete Items -> DefineIncompleteness Procedures -> Incompletion Group B (Sales - Item) -> Procedures -> RR (text RevRec item).

Define a new status group for the accruals account in the customizing:Path: Sales and Distribution -> Basic Functions -> Log of Incomplete Items -> DefineStatus Groups

Status grp General Delivery Billing doc. Price Goods movement RR X X X X

Implement and execute the report ZZ_RR_TVUVF to create the customizing tableentries required for incompletion fields of the procedure and to assign the statusgroups. For more information see SAP-note 1265438.



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4 Description of Core Business Processes

The illustration of typical ERP core business processes show an overview of the suggestive process flowbased on the selected revenue recognition method. Within the process flow the separate steps can bedone in reverse order, especially the chronological order of the creation/releasing of the invoice and theposting of the revenues are variable.

For each ERP core business processes using a chosen revenue recognition method two processes aredescribed to display the different account postings depending on the sequence. There is no relation tovalues done and there is no partial delivery, partial invoicing of partial revenue recognition included. Thedescription is simplified and the process flow productive landscapes are much more complex.

For each ERP core business process there can be combinations and special steps which are not includedin this document. The descriptions are not raise the claim for completeness and in case of requestingdiffering business processes or combinations that are not mentioned in this documents please ask for anassessment (free of charge) of your system landscape from SAP.



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4.1 Standard Revenue Recognition at time of billing

4.1.1 General Information

Process 1 is the ERP standard method for revenue recognition consisting of revenuerecognition at the time of billing.

Companies use standard revenue recognition, if they want to post revenues inFinancial Accounting, as soon as an invoice is released to accounting.

No special revenue recognition functionality is used.Revenue recognition category = ‘ ‘ (blank).

4.1.2 Business steps overview and process description

This process will not be discussed further it is the standard billing process with the standard revenuerecognition at the time of billing.



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4.2 Time based revenue recognition (‘A’)


Using time-related revenue recognition, it is possible to carry out recognition over aspecific period of time. An example of this is revenue recognition for the length of aservice or rental contract. The proportions for the periods are equal.

Time-related revenue recognition can be used for sales document items withoutbilling plan functionality, with periodic billing plans and with milestone billing plans.

Revenue recognition category = ‘A’.

Process 2 characterizes that transaction VF44 is used before invoice.Process 3 demonstrates the process when the invoice is posted before transactionVF44.


Process 2 – time based with VF44 as first

As a first step in the process, the sales contract is created which can contain a billing plan. This salesdocument contains the line items, which have to be billed as well as the relevant conditions. The saving ofthis document triggers the creation of control lines (VBREVK) and the revenue lines (VBREVE) for eachperiod.



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With time-related revenue recognition the recognition is carried out between a specific start and end datein equal parts. The start and end dates are determined on item level in the sales document. Here thebilling plan dates or the contract data dates will be used. The number of periods between these dates isdetermined using the financial calendar for the company code assigned to the document. According tothe number of periods and the amount to be billed, the revenue lines are calculated.

Since the revenue recognition is now initialized, it is possible to realize the revenue using transactionVF44. This triggers the update of the control lines with the realized value and the new balance and theupdate of the revenue lines. A financial accounting document is automatically created, which posts on theaccrual account ‘unbilled revenues’ and on the revenue account.

When the invoice is created and released for accounting, another financial accounting document iscreated, which balances (or reduces) the accrual account and posts on the receivables account. Therevenue recognition tables are also updated by this step. A new reference line is created, containinginformation of the invoice, and the control lines are updated as well.

If only a partial billing took place or was realized, the steps following the order creation may be repeatedfor further periods until the sales document is completed. In such cases another revenue account(deferred account) can be posted.

Process 3 – time based with invoice as first

As a first step in the process the sales contract is created, which can contain a billing plan. This salesdocument contains the line items, which have to be billed as well as the relevant conditions. The saving ofthis document triggers the creation of control lines (VBREVK) and the revenue lines (VBREVE) for eachperiod. With time-related revenue recognition the recognition is carried out between a specific start andend date in equal parts. The start and end dates are determined on item level in the sales document.



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Here the billing plan dates or the contract data dates will be used. The number of periods between thesedates is determined using the financial calendar for the company code assigned to the document.According to the number of periods and the amount to be billed, the revenue lines are calculated.

When the invoice is first created and released to accounting, a financial accounting document is created.It posts to a different accrual account called ‘deferred revenues’ and to the receivables account. Thisevent also triggers the update of the control lines with the realized value and the new balance and createsthe reference lines.

Now transaction VF44 runs. This triggers the update of the control lines and the update of the revenuelines. A financial accounting document is automatically created, which posts on the accrual account‘deferred revenues’ and on the revenue account.

If only a partial billing took place or was realized, the steps following the order creation may be repeatedfor further periods until the sales document is completed. In such cases another revenue account(unbilled receivable account) can be posted.

4.2.3 Variations of the process

Instead of a contract, a sales order can be used as sales document in this process,which then replaces the contract. In this case a billing plan has to be used, if thesales order contains no contract data. This triggers the same follow on steps.

Additional steps of the process can include the delivery of items and posting goodsissue which do not affect the revenue recognition process.

4.2.4 Important remarks

If a contract will be used without contract data and without billing plan, no VBREVElines are created, as there is no start and no end date.

If a condition is added manually in the invoice, but not in the contract/order, and thenew condition is using separate accounts, the posted values from VF44 would differfrom the values posted by the billing document. Then an invoice cannot be releasedto accounting, the error message VFRR010 (No control line for item x in documenty) appears. The solution according to SAP-note 496721 is: the added condition hasto be classified in a way that it is not relevant for revenue recognition. Alternativelythe new condition has to be added in the contract/order too.

In the time-related revenue recognition process, revenue distribution can be used.Revenue distribution is controlled using customizing of a revenue distribution typeand is set in the item category.

Revenue distribution is useful:

o If the billing schedule dates contain different billing document values, and ifyou want to link the distribution of revenue to billing schedule dates usingposting periods in the revenue recognition.

o If an adjustment line item is created by a document change, and if the valueof the adjustment line item is to be distributed across the posting periodsthat have not been recognized yet.



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4.3 Service based revenue recognition (‘B’)


Using service-related revenue recognition, you can carry out recognition on thebasis of a specific event. An example of this is revenue recognition for a sales order,where delivery materials are included. Also service-related revenue recognition canbe used in contracts.

Revenue recognition category = ‘B’.

The contract/order item is ‘delivery-relevant’ and the billing relevance of thecontract/order item is ‘order-related’ (FKREL = B or I) OR ‘delivery-related’ (FKREL= A).

Process 4 demonstrates the process, when transaction VF44 is run before invoicing.Process 5 demonstrates the process, when the invoice is posted before transactionVF44.


Process 4 – service based with VF44 as first



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As a first step in the process the sales order or sales contract is created. This sales document containsthe line items, that are delivery-relevant, that have to be billed and that include the relevant conditions.The saving of this document triggers the creation of the control lines (VBREVK) only. No revenue linesare created at this stage.

The next process step consists of the creation of the delivery with reference to the order/ contract, the lineitems are copied into this document. The goods are picked either with lean warehouse management orwith full warehouse management including transfer orders. When the goods have left the company stock,goods issue is posted. This triggers the creation of the revenue lines (VBREVE) in service based revenuerecognition according to the document data.

It is now possible to realize the revenue using transaction VF44. This triggers the update of the controllines with the realized value, a new balance, and the update of the revenue lines. A financial accountingdocument is automatically created which posts to the accrual account ‘unbilled receivables’ and to therevenue account.

When the invoice is created and released to accounting, another financial accounting document iscreated which balances (or reduces) the accrual account and posts to the receivables account. Therevenue recognition tables are also updated by this step. A new reference line is created containinginformation from the invoice, the control lines will also be updated.

Process 5 – service based with invoice as first

As a first step in the process the sales order or sales contract is created. This sales document containsthe line items, that are delivery-relevant, that have to be billed and that include the relevant conditions.The saving of this document triggers the creation of the control lines (VBREVK) only. No revenue linesare created at this stage.



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The next process step consists of the creation of the delivery with reference to the order/ contract, the lineitems are copied into this document. The goods are picked either with lean warehouse management orwith full warehouse management including transfer orders. When the goods have left the company stock,goods issue is posted. This triggers the creation of the revenue lines (VBREVE) in service based revenuerecognition according to the document data.

Now the invoice is created and released to accounting. A financial accounting document is created, whichposts to the accrual account ‘deferred revenue’ and to the receivables account. The revenue recognitiontables are updated by this step. A new reference line is created containing information from the invoice,the control lines will also be updated.In case of order-related billing meaning that the invoice is created with reference to the order/contract theInvoice can be created before the creation of the delivery.

After releasing of the invoice to accounting, transaction VF44 is used. This triggers the update of thecontrol lines and the update of the revenue lines. A financial accounting document is automaticallycreated, which posts to the accrual account ‘deferred revenue’ and to the revenue account.


Instead of using a delivery-relevant material, a service material can be used in orderitems (contracts with a service material cannot be used).Then the item has to be customized as not ‘delivery-relevant’ and the billingrelevance of the item has to be ‘order-related’ (FKREL = B or I).

Saving of a sales document triggers the creation of control lines (VBREVK) andrevenue lines (VBREVE). Now it is possible to realize revenues using transactionVF44. Creation of the invoice can be before or after the revenue realization(transaction VF44). Invoice is created in reference to the order item.


It is possible to cancel the goods issue posting. If revenues are already recognized,an adjusting line is created. This new adjusting line should be recognized withtransaction VF44. It is important to know that if the goods issue posting is cancelledthe revenues do not have to be cancelled by using transaction VF46.

For contracts, the accrual process is indicated to be finished by user. Manualcompletion can be done by transaction V_MACO or by setting a reason for rejection.

For delivery and billing relevant sales orders, the accrual value is adjusted when theorder item is completely delivered.



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4.4 Service based revenue recognition (‘B’) in contract with call-offorder


Using service-related revenue recognition you can carry out recognition on the basisof a specific event. An example of this is revenue recognition for a contract with acall-off order while the contract item is invoiced and the linked call off order item isdelivered.

Revenue recognition category = ‘B’ for the contract and call-off order.

The billing relevance of the contract item is ‘B’ or ‘I’ (‘order-related invoicing’), whilethe billing relevance of the call-off order item is ‘ ‘ (not relevant for billing).The contract item is not ‘delivery-relevant’, while the call-off order item is ‘deliveryrelevant’.

Process 6 demonstrates the process, when transaction VF44 is run before invoicing.Process 7 demonstrates the process, when the invoice is posted before transactionVF44.





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The first step in this process is the creation of the sales contract, which may contain a billing plan. Thiscontract creation generates control lines in table VBREVK. In the second step a call off order is generatedwith reference to the contract and a delivery may have been created with reference to the call off order.

The next process step is that the goods are picked either with lean warehouse management or with fullwarehouse management including transfer orders. When the goods have left the company stock, goodsissue will be posted. This triggers the creation of the revenue lines (VBREVE).

In the subsequent step, when transaction VF44 is run, an update of the control and revenue lines isgenerated. Additionally a financial accounting document is automatically created, which posts to theunbilled account.

After the invoice is created with reference to the contract and released to accounting, the reference lineswill be created and the control lines will be updated. The created financial accounting document posts tothe unbilled account.


The first step in this process is the creation of the sales contract, which may contain a billing plan. Thiscontract creation generates control lines in table VBREVK. In a second step a call off order is generatedwith reference to the contract and a delivery may have been created with reference to the call off order.

The next process step is that the goods are picked either with lean warehouse management or with fullwarehouse management including transfer orders. When the goods have left the company stock, goodsissue is posted. This triggers the creation of the revenue lines (VBREVE).

In the subsequent step an invoice is created and released to accounting, reference lines (VBREVR) willbe created and control lines (VBREVK) will be updated. Additionally a financial accounting document isautomatically created, which posts to the deferred account.



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While transaction VF44 runs in the next step, an update of the control and revenue lines is generated.Additionally a financial accounting document is automatically created, which posts to the deferred account.


In accordance with the above described process, where the invoice is created related to the contract andthe call-off order is delivered, two other scenarios exist:

The call-off order will be invoiced and delivered.When the call-off order is created with reference to the contract, the saving of thecall-off order creates control lines (VBREVK). After the related delivery has postedthe goods issue, revenue lines (VBREVE) are created.Important remark: The invoice has to be created in reference to the call-off order(‘order-related invoicing’) and NOT in reference to the delivery (‘delivery-relatedinvoicing’).

To implement this scenario the following customizing settings have to be configured:

o The contract item should be customized with revenue recognition category ‘‘, (blank) while the call-off order item should be customized with revenuerecognition category ‘B’.

o The billing relevance of the contract item should be ‘ ‘, while the billingrelevance of the call-off order item should be ‘B’.

The contract will be invoiced and the call-off order will not be delivered.While the contract is created, control lines are created in table VBREVK and duringsaving of the call-off order revenue lines are generated in table VBREVE.

To implement this scenario, the following customizing settings have to beconfigured:

o The revenue recognition category of the contract and the call-off order itemshould be set to ‘B’.

o The billing relevance of the contract item should be ‘B’ or ‘I’, while the billingrelevance of the call-off order item should be ‘ ‘.


If items are added manually in the call-off order, there must be a link to a contractitem otherwise the call-off order items are handled separately.

Considering the original process (contract is invoiced and call-off order is delivered)the system creates an adjustment independent of the status of the revenue linestatus.

For contracts, the accrual process is indicated to be finished by user. Manualcompletion can be done by transaction V_MACO or by setting a reason for rejection.

If a condition is added manually in a call-off order item, but not in the related contractitem, and the new condition is using another deferred accrual account, the call-offorder gets an incompletion.



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After this, the delivery can be created and goods issue can be posted, but in thecreated revenue lines, the deferred revenue account of the new condition remainsmissing. Also there are no control lines for the new accrual account combination. Sothe revenues cannot be posted and the process cannot be finished correctly.Therefore this scenario has to be avoided. If a new condition with another deferredrevenue account is added manually in the call-off order item, this condition has to beentered accordingly in the related contract item.

Contracts with inter-company call-off orders are not supported.

4.5 Time based and billing related revenue recognition (‘D’)


Using time based and billing related revenue recognition, you can carry outrecognition on the basis of an invoice over a specific period of time. An example ofthis is revenue recognition for the length of a service or rental contract after theinvoice is created and released. The proportions for the periods are equal.

Revenue recognition category = ‘D’.

Process 8 will be initialized at the point in time when the billing document is releasedto accounting. Afterwards transaction VF44 is run.




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First a contract or sales order will be created, followed by invoice creation.After the invoice was released to accounting all the revenue recognition tables are filled. The invoiceposts to the deferred account and to the receivable account. The reference lines, the control lines and therevenue lines are now available for the revenue recognition process.

It is now possible to realize the revenue using transaction VF44. This triggers the update of the controllines with the realized value, the new balance and the update of the revenue lines. A financial accountingdocument is automatically created which posts to the accrual account ‘deferred revenues’ and on therevenue account.


Additional steps of the process can include the delivery of items and post goodsissue, which do not affect the revenue recognition process.


The cancellation of the invoice using transaction VF11 is starting its own revenuerecognition process. The releasing of the invoice cancellation document triggers thecreation of separate control, revenue and reference lines. The revenue recognitioncancellation process has no reference to the original revenue recognition process.

4.6 Credit/debit memo processing WITH a credit/debit memo request(‘A’ or ‘B’)


When using time-related revenue recognition in a credit/debit memo processing, it ispossible to carry out recognition over a specific period of time. An example of this isrevenue recognition for the length of a credit/debit memo request. The proportionsfor the periods are equal. The credit/debit memo request is created in reference to acontract, order or invoice.

The credit/debit memo process with a credit/debit memo request sets up its ownrevenue recognition tables.

The credit memo process has the opposite posting logic to the billing. The debitmemo process has the same posting logic to the billing, when posting to the accrualaccounts. When creating and transferring a credit memo to accounting, the systemchecks, whether a balance exists on the deferred revenue (D/R) account, otherwisethe posting is made to the unbilled receivables (U/R) account.

Revenue recognition category = ‘A’ or ‘B’.

Process 9 demonstrates the credit/debit memo processing, when transaction VF44is run before posting the credit/debit memo.Process 10 demonstrates the credit/debit memo processing, when the credit/debitmemo is posted before transaction VF44 is run.



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Process 9 – time based / service based with VF44 as first

As a first step in the process the credit/debit memo request is created, which may contain a billing plan.This sales document contains the line items, which have to be billed as well as the relevant conditions.The saving of this document triggers the creation of control lines (VBREVK) and the revenue lines(VBREVE).

Since the revenue recognition is now initialized, it is possible to realize the revenue using transactionVF44. This triggers the update of the control lines with the realized value and the new balance as well asthe update of the revenue lines.

When transaction VF44 is used in case of the credit memo process, a financial accounting document isautomatically created, which posts to the accruals account ‘deferred revenues’ and to the revenueaccount.

When transaction VF44 is used in case of the debit memo process, a financial accounting document isautomatically created, which posts to the accruals account ‘unbilled receivables’ and to the revenueaccount.

When the invoice is created and released to accounting, another financial accounting document iscreated, which balances (or reduces) the accruals account and posts to the receivables account. Therevenue recognition tables are also updated by this step. A new reference line is created, containinginformation from the invoice and the control lines are also updated.

As a result, the opposite accruals accounts will be used for the credit memo process than are used for thedebit memo process (invoices and debit memos have the same posting logic in accounting).



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Process 10 – time based / service based with invoice as first

As a first step in the process the credit/debit memo request is created, which can contain a billing plan.This sales document contains the line items, which have to be billed as well as the relevant conditions.The saving of this document triggers the creation of control lines (VBREVK) and the revenue lines(VBREVE).

When the invoice is created and released to accounting a reference line is created (VBREVR) and thecontrol lines (VBREVK) of the credit memo request are updated.

In case of credit memo process, the accruals account is the ‘unbilled receivables’ account.

In case of debit memo process, the accruals account is the ‘deferred revenues’ account.

Then transaction VF44 has to be run. This triggers the update of the control lines with the realized valueand the new balance as well as the update of the revenue lines.

As a result the opposite accruals accounts will be used for the credit memo process than for the debitmemo process (invoices and debit memos have the same posting logic in accounting).


The credit/debit memo process with a credit/debit memo request can also be usedas standalone process. It triggers the same steps as described previously.



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In case the credit/debit memo request is created in reference to an invoice, the itemcategory of the credit/debit memo request has to be assigned to a billing plan typeso that the credit memo request includes billing plan dates. Otherwise a start andend date has to be entered manually.

4.7 Credit/debit memo processing WITH a credit/debit memo request(‘D’)


When using time based and billing related revenue recognition in a credit/debitmemo processing, it is possible to carry out recognition on the basis of an invoiceover a specific period of time. An example of this is revenue recognition for thelength of a credit/debit memo request. The proportions for the periods are equal.The credit/debit memo request is created in reference to a contract, order or invoice.

The credit/debit memo process with a credit/debit memo request sets up its ownrevenue recognition tables.

The credit memo process has the opposite posting logic to the billing. The debitmemo process has the same posting logic to the billing, when posting to the accrualaccounts.

When creating and transferring a credit memo to accounting, the system checks,whether a balance exists on the deferred revenue (D/R) account, otherwise theposting is made to the unbilled receivables (U/R) account.

Revenue recognition category = ‘D’.

Process 11 demonstrates the credit memo processing. It will be initialized at thepoint in time when the credit memo is released to accounting. Afterwards transactionVF44 is run.



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As a first step in the process the credit/debit memo request is created, which can contain a billing plan.This sales document contains the line items, which have to be billed as well as the relevant conditions.

When the invoice is created and released to accounting, all the Revenue Recognition tables are filled -the reference lines (VBREVR), the control lines (VBREVK) and the revenue lines (VBREVE) are nowavailable for the Revenue Recognition Process.

In case of credit memo, the accrual account is the ‘unbilled receivables’ account.

In case of debit memo, the accrual account is the ‘deferred revenues’ account.

Then transaction VF44 has to be run. This triggers the update of the control lines with the realized valueand the new balance as well as the update of the revenue lines.

As a result the opposite accrual accounts will be used for the credit memo process than for the debitmemo process (invoices and debit memos have the same posting logic in accounting).


The credit/debit memo process with a credit/debit memo request can also be usedas standalone process. It triggers the same steps as described previously.



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When using revenue recognition category = ‘D’ the credit/debit memo request has tobe created and released before the revenues can be realized, because thecredit/debit memo triggers the creation of the revenue recognition tables.

In case the credit/debit memo request is created in reference to an invoice, the itemcategory of the credit/debit memo request has to be assigned to a billing plan typeso that the credit memo request includes billing plan dates. Otherwise a start andend date has to be entered manually.

4.8 Credit/debit memo processing with reference to a precedingdocument (‘F’)


Using time-related revenue recognition in a credit/debit memo processing, it ispossible to carry out recognition over a specific period of time equal to the originalprocess.Using service-related revenue recognition in a credit/debit memo processing, it ispossible to carry out recognition on the basis of a specific event equal to the originalprocess.The credit/debit memo request is created in reference to a contract, order or invoice.

No new revenue recognition tables will be created. The credit/debit memo processupdates the revenue recognition tables of the preceding sales process.

The revenue recognition category for the credit/debit memo process is ‘F’ whilethe revenue recognition category in the preceding process is ‘A’ or ’B’.

Process 12 will be initialized at the point in time, when the credit memo is releasedto accounting. Afterwards transaction VF44 is run.



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The credit/debit memo process will be created with reference to a preceding sales document or billingdocument, and with revenue recognition category ‘F’ it updates the revenue recognition tables of thepreceding sales process.

When this category is set for the credit/debit memo request, the system checks whether the referencedocument is relevant for 'time-related revenue recognition' (method 'A') or ‘service-related revenuerecognition’ (method ‘B’). In these cases the subsequent credit/debit memo generates reference lines(VBREVR) corresponding to the original document.

The posting to the accounts depends on whether there is a balance on the D/R or the U/R account(revenue recognition run is done and/or invoice is released to accounting in the original process).


None.


Releasing of credit/debit memo to accounting creates a VBREVC entry and therevenue recognition tables of the preceding original process have to be updated.Here fore transaction VF42 for the original sales document can be used (in case theoption ‘Indicating the documents’ is chosen).



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Alternatively a manual update by using VA02/VA42 can be done.

In case of using revenue recognition category = ‘A’ the following has to beconsidered:

o The total accrual value is changed meaning the credit/debit memo value isconsidered.

o If revenues have not been posted, the revenue amount of the existingrevenue lines is adjusted.

o If revenues have already been posted, the system creates adjustment linesto consider the credit/debit memo value.

o Afterwards these adjustment lines have to be realized by using VF44.

In case of using revenue recognition category = ‘B’ the following has to beconsidered:


o The revenue amount of the existing revenue lines is adjusted or the systemcreates adjustment lines considering the credit/debit memo value when theprocess is finished.

o For contracts the accrual process is indicated to be finished by user.Manual completion can be done by transaction V_MACO or by setting areason for rejection.

o For delivery and billing relevant sales orders the accrual value is adjustedwhen the order item is completely delivered. In case the order is not relevantfor delivery but is billing relevant, the adjustment is carried out with an orderupdate.

Revenue recognition category = ‘D’ in the preceding process in combination withrevenue recognition category ‘F’ in the credit memo process is not supported.

4.9 Credit/debit memo processing WITHOUT a credit/debit memorequest (‘A’ or ‘B’)


Using time-related revenue recognition in a credit/debit memo processing, it ispossible to carry out recognition over a specific period of time equal to the originalprocess. Using service-related revenue recognition in a credit/debit memoprocessing, it is possible to carry out recognition on the basis of a specific eventequal to the original process. The credit/debit memo is created in reference to aninvoice and there is no credit/debit memo request.

No new revenue recognition tables will be created. The credit/debit memo processupdates the revenue recognition tables of the preceding sales process.

The revenue recognition relevance is transferred from the previous document.Revenue recognition category = ‘A’ or ’B’.



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Process 13 will be initialized at the point in time when the credit memo is released toaccounting. Afterwards transaction VF44 is run.


If a credit memo/debit memo is created and the reference document is the billing document, the creditmemo/debit memo updates the revenue recognition tables of the preceding sales process.

Therefore the posting to the accounts depends on whether there is a balance on the D/R or the U/Raccount (revenue recognition run is run and/or invoice is released to accounting).


Instead of using revenue recognition category ‘A’ or ‘B’, revenue recognitioncategory ‘D’ can be used.But the credit memo/debit memo doesn’t update the existing revenue recognitiontables of the preceding original process. The credit memo/debit memo starts its ownrevenue recognition process. The release of the credit memo/debit memo documenttriggers the creation of separate control, revenue and reference lines.



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Releasing of the credit/debit memo to accounting creates a VBREVC entry and therevenue recognition tables of the preceding original process have to be updated.Here fore transaction VF42 for the original sales document can be used (in case theoption ‘Indicating the documents’ is chosen).Alternatively a manual update by using VA02/VA42 can be done.

In case of using revenue recognition category = ‘A’ the following has to beconsidered:


o If revenues have not been posted, the revenue amount of the existingrevenue lines is adjusted.

o If revenues have already been posted, the system creates adjustment linesto consider the credit/debit memo value.

o Afterwards these adjustment lines have to be realized by using VF44.

In case of using revenue recognition category = ‘B’ the following has to beconsidered:


o The revenue amount of the existing revenue lines is adjusted or the systemcreates adjustment lines considering the credit/debit memo value when theprocess is finished.

o For contracts the accrual process is indicated to be finished by user. Manualcompletion can be done by transaction V_MACO or by setting a reason forrejection.

o For delivery and billing relevant sales orders the accrual value is adjustedwhen the order item is completely delivered. In case the order is not relevantfor delivery but is billing relevant, the adjustment is carried out with an orderupdate.

4.10 Return processing with reference to an order (‘B’)


Using service-related revenue recognition in a return processing can carry outrecognition on the basis of a specific event equal to the original process. The returnorder is created in reference to an order after the order was delivered.The return order is invoiced with a credit memo.

No new revenue recognition tables will be created. The return process updates therevenue recognition tables of the preceding sales process.

Revenue recognition category = ‘B’.

Process 14 demonstrates the process when transaction VF44 is ran before creationof the credit memo.Process 15 demonstrates the process when the credit memo is posted beforetransaction VF44 is run.



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The return process will be created with reference to a preceding sales document and with revenuerecognition category ‘B’. It updates the revenue recognition tables of the preceding sales process.

As a first step the return sales order is created with reference to the sales order. This sales documentcontains the line items, which have to be credit as well as the relevant conditions. The saving of thisdocument does not trigger the update of the control lines (VBREVK). No revenue lines are created at thisstage.

The next process step consists of the creation of the delivery with reference to the return order; the lineitems are copied into this document. The goods receipt is posted. This triggers the creation of therevenue lines (VBREVE) in service based revenue recognition according to the document data.

It is now possible to realize the revenue using transaction VF44. This triggers the update of the controllines with the realized value, a new balance, and the update of the revenue lines. A financial accountingdocument is automatically created, which posts to the accrual account D/R or U/R and to the revenueaccount.

The posting to the accounts depends on whether there is a balance on the D/R or the U/R account(revenue recognition run is done and/or invoice is released to accounting in the original process).

When credit memo is created and released to accounting, another financial accounting document iscreated, which balances (or reduces) the accrual account and posts to the receivables account. Therevenue recognition tables are also updated by this step. A new reference line is created containinginformation from the credit memo, the control lines will also be updated.



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As a first step the return sales order is created with reference to the sales order. This sales documentcontains the line items, which have to be credited as well as the relevant conditions. The saving of thisdocument does not trigger the update of the control lines (VBREVK). No revenue lines are created at thisstage.


In the subsequent step a credit memo is created with reference to the return sales order and released toaccounting, reference lines (VBREVR) will be created and control lines (VBREVK) will be updated.Additionally, a financial accounting document is automatically created, which posts to the D/R or U/Raccount

Therefore the posting to the accounts depends on whether there is a balance on the D/R or the U/Raccount (revenue recognition is run and/or invoice is released to accounting).

When transaction VF44 runs in the next step, an update of the control and revenue lines is generated.Additionally a financial accounting document is automatically created.



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Instead of using revenue recognition category ‘B’, revenue recognition category ‘D’can be used.


Nothing.

4.11 Return processing with reference to a contract and call-off order (‘B’)


Using service-related revenue recognition in a return processing with reference to acontract / call off order can carry out recognition on the basis of a specific eventequal to the original process. In the original process the contract item is invoiced andthe linked call off order item is delivered. The return order is created in reference tothe call off order after the call off order was delivered. There won’t be a credit memofor the return process due to the call off order isn’t billing relevant.

No new revenue recognition tables will be created. The return process updates therevenue recognition tables of the preceding sales process.

The revenue recognition category of the contract / call off order / return order itemshould be set to ‘B’.

The billing relevance of the contract item should be ‘B’ or ‘I’, while the billingrelevance of the call-off order and return order item should be ‘ ‘.

Process 16 will be initialized at the point in time when the goods issue posting isdone for the return order. Afterwards transaction VF44 is run.



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As a first step the return sales order is created with reference to the call off order. This sales documentcontains the line items, which do not have to be credit. In this process the sales contract is relevant forbilling. The saving of this document does not trigger the update of the control lines (VBREVK). Norevenue lines are created at this stage.


Afterwards it is possible to run transaction VF44, an update of the control and revenue lines from thecontract is generated. Additionally a financial accounting document is automatically created, which poststo the D/R or U/R account

Therefore the posting to the accounts depends on whether there is a balance on the D/R or the U/Raccount (revenue recognition is run and/or invoice is released to accounting).



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In accordance with the above process, where the invoice is created related to the contract and the call-offorder is delivered, another scenario exists:

The call-off order will be invoiced and delivered.When the call-off order is created with reference to the contract, saving of the call-offorder creates control lines (VBREVK). After the related delivery has posted thegoods issue, revenue lines (VBREVE) are created.

Important to know:

The invoice has to be created in reference to the call-off order (‘order-relatedinvoicing’) and NOT in reference to the delivery (‘delivery-related invoicing’).

In the following return order processing the return order will be created withreference to the call-off order. The saving of the return order creates control lines(VBREVK) with the document number of the return order.

There is NO link between the call-off order and the return process. Also the returndelivery and the return credit memo create their entries with the number of the returnorder.

To implement this scenario the following customizing settings have to be configured:

o The contract item should be customized with revenue recognition category‘ ‘, while the call-off order item and the return order item should becustomized with revenue recognition category ‘B’.

o The billing relevance of the contract item should be ‘ ‘, while the billingrelevance of the call-off order and the return order item should be ‘B’.


Return processing with reference to a contract that is invoiced and a call-off orderthat is not delivered is not supported.

The use of revenue recognition category ‘A' in a return processing is not supported.

RR Best Practices V16 Part1

Documents

lean warehouse

practice knowledge

creditdebit

practice knowledge

processsap

fore transaction

document flow

incorrect