Revenue contracts and performance obligations were introduced in Revenue Management V4.0 to support multiple-element arrangements. You may need to use multiple-element arrangements to comply with ASC 606, IFRS 15, or other revenue recognition legislation.
By default, source records linked to revenue contracts (via performance obligations) are excluded from revenue recognition processes. This is because when using a multiple-element arrangement, revenue is recognized on the revenue contract rather than on the source records themselves.
If you are switching to recognizing revenue using multiple-element arrangements, you must compare the results of recognizing revenue directly on source records with the results of recognizing revenue using the multiple-element arrangement. Revenue Management allows you to generate both sets of data for the purpose of parallel reporting.
Use the Create Data for Parallel Reporting? checkbox on the Recognize Revenue page to determine which set of data to generate:
- Deselect this checkbox to run revenue recognition directly on source records that are not linked to revenue contracts. This was the only revenue recognition process available in versions of Revenue Management prior to V4.1. The checkbox is deselected by default.
- Select this checkbox to run revenue recognition on source records that have a "Use in Revenue Contract" template
A template that has the Use in Revenue Contract checkbox enabled.. These source records should be linked to performance obligations so that their revenue can be recognized as part of the revenue contract.
Both options allow you to create transactions which you can use for comparison purposes. See the illustration below for an example of how you might use this feature.
Illustration of Creating Data for Parallel Reporting
Let's assume your primary source objects are Projects and Sales Invoices, and until now you have recognized revenue on timecards and sales invoice line items.
You then switch to using multiple-element arrangements, so your timecards and sales invoice line items are now linked to performance obligations and use templates where the Use in Revenue Contract checkbox is enabled. Each revenue contract contains some performance obligations linked to timecards, and some performance obligations linked to sales invoice line items.
To recognize revenue on your revenue contracts, you go to the Recognize Revenue page and select the Revenue Contracts source object tab, then run revenue recognition ensuring that the Create Data for Parallel Reporting? checkbox is deselected. This results in revenue being recognized on the revenue contracts themselves, rather than on the timecards and sales invoice line items. Upon submitting revenue for recognition, you set the legislation type to the legislation you are currently following, such as ASC 606.
To generate parallel data for comparison purposes, you now go to both the Projects and Sales Invoices source object tabs in turn, then run revenue recognition with the Create Data for Parallel Reporting? checkbox selected. This results in revenue being recognized on timecards and sales invoice line items that are linked to performance obligations and use templates where the Use in Revenue Contract checkbox is enabled. Upon submitting revenue for recognition, you set the legislation type to the legislation you originally followed, such as ASC 605.
You now have two sets of transactions for different legislation types. You can create reports to compare the two sets of data.