Using Historical Rates for Service Contract Revenue Recognition

When calculating the contract revenue amount for a fiscal period, the invoiced installment amount in the home currency must be used to retrieve the historical currency rates instead of currency rates defined for the contract (transaction) currency and the company's home currency.

Invoicing Contract Installment

The net installment amount is invoiced only in the transaction currency. When the billable line is processed in the Contract Installments (tsctm4100m000) session, the invoice amounts are calculated in home currency using the date applicable on the invoice. The contract installment is updated with the invoice/revenue amount in the home currency and the installment Status is set to Posted.

When the contract Recognize Revenue method is set to Direct by installment in the Contract Management Parameters (tsctm0100m000) session, an integration transaction is generated in the Invoicing 360 (cisli3600m000) session with the Source Document type field set to Service Contract.

Calculating Contract Revenue

The contract revenue amount expressed in the transaction currency is used to calculate the revenue amounts in the company's home currency, when contract revenues are calculated for a revenue periods. To calculate the contract revenues, the currency rates are applied from contract installment posted in the Contract Installments (tsctm4100m000) session.

To recognize the contract revenue, LN searches for the posted installment, based on the entire contract or individual contract configuration.

The contract installment may or may not be linked to the configuration lines.

If contract installments are not linked to contract configuration lines, all the posted installments are considered.

If contract installment are linked to the contract configuration lines, LN only considers the contract installment for the linked configuration lines i.e. at the time of revenue recognition, posted contract installment with a change number and configuration line number must be same as change number and configuration line number of the revenue line.

Note: 
  • For revenue recognition, the contract Installment Type must be set to Periodic Installment or Manual Installment or Closure Installment in the Contract Installments (tsctm4100m000) session.

When the contract installments are not available, the currency rates for calculating the revenue amount in home currency are retrieved based on the new rate on the specific date and the contract's exchange rate type. When contract installments are available, the first contract installment with the possibility for revenue allocation is selected. When previous revenue periods are not available, the revenue amount in home currency is calculated using the rates of the first posted contract installment.

Calculating Contract Revenue Manually

When the contract revenue is calculated manually, the allocations are not based on the posted contract installments. When you manually define the revenue amount in the transaction currency, you must also specify the revenue amount for the home currencies. The currency rates (based on the System date) are used for calculating the revenue amount in the home currency.

Recognising Revenue

When the contract revenues are recognised, the revenue line Status is set to Recognized in the Contract Revenues (tsctm4160m000) session and a financial integration transaction is created in the Invoicing 360 (cisli3600m000) session with the Source Document type set to Service Contract. When the contract Recognize Revenue method is set to Direct by installment and the contract installment Status is set to Posted in the Contract Management Parameters (tsctm0100m000) session , the integration transaction is created.

Close Service Contract

You can close the service contract only if the Status of all the contract installment is set to Posted or Canceled in the Contract Installments (tsctm4100m000) session and the Status of the contract revenue must be set to Posted in the Contract Revenues (tsctm4160m000) session.

The total contract invoice amount in the home currency must be equal to the total contract amount in the home currency if the Use Multiple Functional Currencies check box Companies (tcemm1170m000) session.