Defining a Product Contract

Access Product Contract (BR51.1).

Select the Contract you are defining. The contract date defaults from the contract activity’s begin date, but can be overridden.

On the Main tab is information that applies to the entire contract. This information will default down to the individual product lines, but some information can be overridden (using the Detail tab) if necessary. Use the following guidelines to enter field values:

Contract Status: Type or select the status for the product contract. For example, the status might be pre-cutoff, shipped, or post-cutoff. Contract statuses are defined on Contract Status (BR30.1).
Contract Deferred Revenue: Select whether or not there is any deferred revenue associated with this contract. If Y, you can specify a Contract Deferred Rev Amt and a Reason Code for the deferral. This can be overridden for each product on the Detail tab if needed.
Contract Def Rev Amt (Deferred Revenue Amount): Type the revenue amount (exclusive of free maintenance) to be deferred for the contract. The amount to defer to each product is calculated as the proportion of the product's net price to the net price of the total contract, multiplied by the value entered here.
Reason Code: Type or select the code that explains why revenue is deferred for this contract. For example, the contract might have excessive service discounts, or fixed fees. Reason Codes are defined on Reason Codes (BR08.1).
Discount Percent: Type the percentage discount applied to the actual list price of each product in the contract. This discount amount is applied to all products for revenue recognition purposes, but can be overridden at the detail level if needed. The discount percent cannot exceed 100%.
Product List: Type or select the product list in which all products on the contract are included. Product Lists are defined on Product List Maintenance (BR50.1).
Posting Activity: Type or select the posting activity to which revenue and cost of goods sold amounts are posted for this contract. This activity must be a posting activity under the contract activity for this product contract.
Location: Type or select the location to appear on the invoice. Locations are defined on Service Location (BR16.1).

Select the Free Maint tab to enter information about any free maintenance that is included in the product contract. Use the following guidelines to enter field values:

Maintenance Schedule: Type or select the maintenance schedule used to recognize revenue for free customer support maintenance for the contract.
Maintenance Percent: Type the percentage of the override list or invoice net amount used to calculate the free maintenance amount.
List or Net: Type or select List (1) or Net (2) to specify which amount is used to calculate maintenance amounts.
Free Maint Begin Date: Type or select the date when free maintenance begins for the contract.

Note: This date range must include the dates on all detail lines.
Free Maint End Date: Type or select the date when free maintenance ends for the contract.
Default Company: Type or select the GL company for the free maintenance schedule. If this is blank, the default GL company on Activity (AC10.1) is used.
Default Acct Unit: Type or select the GL accounting unit for the free maintenance schedule. If this is blank, the default GL accounting unit on Activity (AC10.1) is used.

Select the Detail tab to enter information for specific products, or to override defaults from the contract header. Use the following guidelines to enter field values:

Product: Type or select the product to add to the contract. Products are defined on Product List Maintenance (BR50.1).
Version: Type or select the version of the product that was sold and shipped to the customer.
Nbr of Users: Type the number of users included in the product sale.
Base Calc: Select Yes to include the base price of the product in the total amount for the contract. Select No to leave the base price amount out of the calculation, if you are selling only additional user licenses. The default is Yes.
Def Rev (Deferred Revenue): Select Yes if revenue is deferred for this product, or No if there is no deferred revenue. Select X (Not shipped) if the product line is fully deferred because it has not yet shipped. This value defaults from the Main tab, but can be overridden here.
Deferred Amount: This field displays the current deferred revenue amount for the contract (the amount of deferred revenue not yet processed). It is the total of all unprocessed deferred revenue lines on the associated deferred revenue schedule.
Def Schd (Deferred Schedule): Click the * to access Product Deferred Revenue Schedule (BR53.1). Use this form to add the revenue recognition schedule for the specific product.
Reason Code: Select the code that explains why revenue is deferred for this product. For example, the contract might have excessive service discounts, or fixed fees. Reason Codes are defined on Reason Codes (BR08.1). This defaults from the Main tab, but can be overridden here.
Cmt (Comments): Click the Cmt button to access Product Detail Comments (BR31.2). Use this form to add comments about a specific product.

You can specify more information about each product on the tabs at the bottom of the Detail tab. On the Revenue Amts tab, use the following guidelines to enter field values:

Actual List: Type the actual list price of the product from the price book. This price includes the base price for the product and the price of any additional users. This default from the product list but can be overridden here.
Override List: Type the list price as entered by the user, which may be an override of the actual list price. This is the basis for the price charged to the customer. If this field is blank, the actual list price is used.
Discount Pct (Percent): Type the discount percent for the product based on the blended discount percent required for revenue recognition. This defaults from the Main tab, but can be overridden here. This percent is multiplied by the actual list to determine the discount amount.

On the Invoice Amts tab, use the following guidelines to enter field values:

Inv Net Price

Type the net price of the product after any invoice discounts have been applied. This is the amount that appears on the customer invoice, is taxable, and the amount on which maintenance is based if maintenance is based on net value. If this is blank, the override list price is used.

Delivery Method

Select the delivery method for the product. Valid options are:

S (Shipped)
H (Hosted)
E (Electronic)
L (Loaded)
1, 2, or 3 (user-defined)

This field is used in conjunction with the relationships on Product Tax Relationships (BR58.1) to calculate tax amounts in situations where tax is based on delivery method.

On the Product Detail tab, use the following guidelines to enter field values:

Ship Date: Type the date the product was shipped to the customer, if it has been shipped. You must enter either a Ship Date or an Anticipated Ship Date in order to create a maintenance schedule. This date defaults from the Free Maint Begin Date, but can be overridden here.
Anticipated Ship Date: Type the date on which the product is going to be shipped, if it has not already been shipped. You must enter either a Ship Date or an Anticipated Ship Date in order to create a maintenance schedule.
Maint End Date: Type the ending date for the maintenance schedule for a product. This value defaults from the Free Maint tab entered there.
Maintenance Percent: Type the percent of the contract amount that is used to calculate the free maintenance amount for the product.
List or Net: Select whether the maintenance amount is based on the invoice net price (2) or the override list (1) price of the product.
Suite: Type or select the product group or suite to which this product belongs, if applicable. The suite can be included on a custom invoice, or can be used for sorting.
User Fields: Use these fields to store additional information that differentiates a product, such as server type, database type, and operating system.
Site Location: Select the site where the product is used.

On the Revenue Accounts tab, use the following guidelines to enter field values:

Acct Category: Type or select the revenue account category for the product. This value defaults from the Product List Maintenance (BR50.1), but can be overridden here.
Account: Type or select the GL account and subaccount for revenue for the product. This value defaults from the Product List Maintenance (BR50.1), but can be overridden here. If the account field is completed, leave the GL Code field blank.
GL Code: Type or select the GL code for revenue for the product. This value defaults from the Product List Maintenance (BR50.1), but can be overridden here. If the GL Code is completed, leave the Account field blank. The GL Code is an abbreviation to group a GL company, accounting unit, account and subaccount. GL Codes are defined on GL Code (AC04.1).

Select the Billed Accounts and Unbilled Accounts tabs to select the accrual account categories, GL accounts or GL codes to use for the product contract billed and unbilled amounts.

Note: The account categories used for billed and unbilled must be accrual type.

Select the Change form action to update the product contract.

Click the Milestones button to access Product Billing Milestones (BR54.1) and define billing milestones for the product contract. For more information, see Defining Product Billing Milestones.

If there is deferred revenue on the contract, click the Def Revenue button to create a deferred revenue schedule on Product Deferred Revenue Schedule (BR53.1). (You can also access this form using the Def Schd button on the detail lines.) For more information, see Defining a Deferred Revenue Schedule. Creating the deferred revenue schedule should be done prior to releasing the contract.

If there is Cost of Good Sold information related to this product contract, click the Cost of Goods button to define the information on Product Cost of Goods Sold (BR51.2). For more information, see Defining Cost of Goods Sold Information for a Product Contract.

If there is free maintenance associated with the product contract, select the Create Maint Sch special action to create the associated maintenance schedule. The Create Maint Sch action creates a maintenance schedule for the contract/maintenance schedule combination on the Free Maint tab. It also creates reclass journal entries that transfer the deferred revenue amount for free maintenance from product to maintenance billed accounts.

This special action can be used only once for a contract. Once the maintenance schedule is created, the Create Maint Sch action can not be used again for that contract/maintenance schedule combination.

Note: If you make changes to the product contract after the schedule is created, you must also make the same changes manually to the maintenance schedule.

Select the Release for Rev special action to change the status of the product contract to Released. No changes can be made to a Released product contract, and the revenue from the contract is available for recognition. All deferred revenue must be fully scheduled before the contract can be released.