This process is used to prepare monthly, quarterly, or annual financial statements for a project, with reference to the anticipated results.
After using this process the project's costs and revenues are recognized, in that:
The process can be started when the following prerequisites are met:
The section below describes the activities in this process.
Changing Recognition Status
The recognition status indicates whether to recognize costs and revenues. This status is used only with recognition methods 1 and 2. The status must be set to 80 (in 'Project. Update Recognition Status' (POS280)) to recognize cost and revenues in the project. The status is most often changed in connection with such events as delivery or when the project is finished. The recognition status can be either 20=not recognized or 80=recognized.
The initial recognition status is set in 'Project Template. Open' (POS093/F), using F14 = Recognition status. The status can be different for the various parts of a project. For example, if the project is divided into two stages, the first can have status 20, while the second has 80. Note that recognition status can only be changed for project elements marked for budgeting and on elements at the highest level.
Recognition status 85 is possible to assign. The functionality is equal to 80 but the elements assigned recognition status 85 are possible to select in the project report (POS650).
Creating Recognition Proposal
The recognition status identifies the progress made with the recognition proposal. Revenues and expenses are recognized for projects each period. When created, the recognition proposal is displayed 1) on the project reporting level, and 2) totaled for each reporting period and recognition method.
Recognition proposals include six different amounts for which the recognition method selected regulates how and if they are calculated. The amounts are:
The following table lists the different methods to calculate the recognized costs and revenues.
|Recognition Method||Activated WIP - Costs||Activated WIP - Revenues||Recognized Costs (Cr)||Recognized Revenues (Rr)||Reservation Cost||Reservation Revenue|
Explanation of Keys
|Cbo||Lowest amount comparing time-distributed forecast and actual total cost.|
|Cf||Total cost forecast|
|Cf80||Cost forecast budget level (for project elements with recognition status 80)|
|Co||Total actual cost|
|Co80||Actual cost (for project elements with recognition status 80)|
|Qbo||Lowest quantity comparing time-distributed forecast and actual quantity. Note that only budget items with entry option 4 are considered.|
|Qf||Quantity forecast. Note that only budget items with entry option 4 are considered.|
|Qo||Quantity outcome, that is, the actual quantity reported in the Time Accounting module. The quantity usually refers to hours.|
|Rf||Total revenue forecast|
|Rf80||Revenue forecast budget level (for recognition status 80)|
|Ro||Total actual revenue|
Recognition Methods 7 and 8
Recognition methods 7 and 8 are the same in all respects but one: method 8 enables you to distribute the recognition amount between several accounts instead of just one. The accounts to use for method 8 are defined in 'Recognition Account. Open' (POS825) by selecting related option 11 = 'Recoding'. This option displays program 'Recognition Account. Recode' (POS826), where the user defines the accounts to use for the distribution.
Accounting Events Description
When the project is not closed (project status < 80):
When the project is closed (status = 80):
If no errors are identified during the creation of recognition proposal, the proposal status is set to 20.
Recognition method 3 requires a locked scheduling version. If there is none, an error code is displayed per project and the proposal is assigned status 19. Transactions cannot be transferred to the general ledger until the error is corrected and the proposal regenerated.
The amounts for recognized costs and recognized revenues in the generated proposal can be rounded off. The rounding rules are defined by recognition method in 'Settings - Recognition' (POS820).
Adjusting Recognition Proposal
These proposals can be adjusted for recognized costs, recognized revenues and reservations. Activated work in progress cannot be changed.
If the recognition level defined in 'Settings – Project Management' (CRS590) are set for transfer to the general ledger on the project level, the amounts can only be adjusted on the project level. If a transfer is made on the total level, the amounts on both the project level and total level can be adjusted. The adjusted proposal is assigned status 30.
Transferring Recognition to General Ledger
For transfer to the general ledger:
If the project is not closed, all account entries are reversed the first day of the next accounting period. If the project is closed, there is no reversal. When the project costs/revenues are recognized as final, the project status is set to 85=final. Note that projects with costs/revenues not recognized as final cannot be restarted.