Project Recognition Method
To recognize project costs and revenues, a recognition method must be specified in the reporting level in the project. Recognition method is selected per project reporting level. It is set on 'Project. Open' (POS100/G) on the reporting level of a project and cannot be set on activity level. It can only be set on main and sub project level. These methods are available:
| Recognition method | Description |
|---|---|
| 0 | No recognition |
| 1 | Recognition at delivery or project completion |
| 2 | Manual recognition at delivery or project completion |
| 3 | Percent of completion (POC) with distributed budget/forecast |
| 4 | POC with total budget/forecast |
| 5 | As method 3, but with distributed budget/forecast for work performed (budget item with entry option 4) |
| 6 | As method 4, but with total budget/forecast for work performed (budget item with entry option 4) |
| 7 | Recognition based on actual revenue |
Different methods can be processed in parallel during recognition. However, only one method is valid per project and reporting level.
Explanation of the methods:
0 = No recognition.
1 = Recognition status. Recognition when recognition status is 80 in 'Project. Update Recognition Status' (POS280). This can be used at delivery or when a project is completed. A reservation for actual cost is also made.
2 = Recognition status, no cost or profit reservation. Same as method 1, but no actual cost reservation.
3 = Percent of completion, cost with time distribution. Percentage of completion (POC) with budget distributed over time.
4 = Percentage of completion, cost without time distribution. POC without budget distribution over time. The total budget is considered when this is calculated.
5 = Percent of completion, number of hours with time distribution. POC with budget distribution over time. The cost to be recognized is only affected by WIP costs reported for hours.
6 = Percent of completion, number of hours without time distribution. POC without budget distribution over time. The total budget is considered when this is calculated. The cost to be recognized is only affected by WIP costs reported for hours.
7 = Percent of completion, revenue amount. Recognition is based on the project’s invoice amount. Several income and cost account entries created. The size of the costs that are calculated are affected by the percentage of actual revenue as compared to total expected revenue.
8 = Percent of completion, revenue amount with re-accounting. Statement of income is based on the project’s invoice amount. Several income and cost account entries are created. The size of the costs that are calculated are affected by the percentage of actual revenue as compared to total expected revenue.
For recognition methods 5 and 6, only budget items with entry option 4-‘Quantity’ are considered when calculating the recognized amounts.
- Activated work in progress - costs
- Activated work in progress - revenues
- Recognition - costs
- Recognition - revenues
- Actual cost reservation
- Actual revenue reservation.
This table shows the different methods and how each method calculates the recognized costs and revenues:
| Recognition method | Activated WIP - costs | Activated WIP - revenues | Recognized costs (Cr) | Recognized revenues (Rr) | Reservation cost | Reservation revenue |
|---|---|---|---|---|---|---|
| 1 | Yes/no | Yes/no | Cf* (Rf80/Rf) | Rf80 | Cr-Co80 | No |
| 2 | Yes/no | Yes/no | No | No | No | No |
| 3 | Yes/no | Yes/no | Co | Rf*(Cbo/Cf) | No | Rr-Ro |
| 4 | Yes/no | Yes/no | Co | Rf*(Cbo/Cf) | No | Rr-Ro |
| 5 | Yes/no | Yes/no | Co | Rf*(Cbo/Cf) | No | Rr-Ro |
| 6 | Yes/no | Yes/no | Co | Rf*(Cbo/Cf) | No | Rr-Ro |
| 7 | Yes/no | Yes/no | Cf*(Ro/Rf) | Ro | Cr-Co | No |
| 8 | Yes/no | Yes/no | Cf*(Ro/Rf) | Ro | Cr-Co | No |
Explanation of keys:
| Key | Description |
|---|---|
| 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) |
| Cr | Recognized cost |
| 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 |
| Rr | Recognized revenue. |
Recognition methods 7 and 8
Recognition methods 7 and 8 are the same in all aspects 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 'Recognition Account. Recode' (POS826), where you define the accounts to use for the distribution.