The revenue recognition forecasting process enable users to plan and report on future revenue recognition for projects. For this purpose two types of basic data need to be defined.
Basic Data Requirements (BDR)
Revenue recognition forecast types need to be defined to group similar forecast versions. Three forecast types are suggested by the company template such as General, Review, and Simulation. You can define any number of forecast types. It is also possible to indicate forecast type as Periodic Review.
Then revenue recognition forecast period profile need to be defined. There is a default profile suggested by the company template. This profile is used to indicate how the periods for forecast should be created. That is for how many periods, quarters, biannual or years. If a period should be created for the valid until date of the project irrespective of the period profile, Add a Period for the Expected Date of Completion should be enabled.
Create Revenue Recognition Forecast
After defining above basic data, you are ready to create revenue recognition forecast. There are two ways to create revenue recognition forecast. One way is to create forecast for one or more projects based on the project identity, project group or project manager. You can select the ledger and the ledger ID from which the projects should be selected and select the cut off accounting period and the period profile to use when creating revenue recognition forecast. The other way is to create revenue recognition forecast based on an existing forecast. If you create forecast for a similar set of projects but for different cut off accounting period, creating a forecast based on an existing forecast could be the best way. If the forecast is created based on another forecast, information of the previous forecast is updated in current forecast. If the forecast is created using forecast type with Period Review, it is not allowed to create more than one forecast version for a particular cut off accounting period.
After creating the revenue recognition forecast, you can see the accounting periods created for each project as per the selected period profile in the Revenue Recognition Forecast page. If there is any actual cost related to project, such amounts will be updated in the Actual Cost to Date field. If the project is included in the revenue recognition process, the latest revenue recognition information will be updated in the revenue recognition forecast. The estimated revenue and cost of the project will also be indicated, but user has the option of modifying these estimates and see the impact. For this purpose, amounts can be entered in the Estimated Revenue Modified and the Estimated Cost Modified fields.
The first accounting period will be created after the cut off accounting period. For example, if the company is having accounting calendar from January to December and period profile is to create forecast quarterly basis and the cut off accounting period is January 20XX, the first accounting period in the revenue recognition forecast will be March 20XX. If the period profile is to create forecast periodically, the first accounting period in the revenue recognition forecast will be February 20XX.
If all the projects qualify for revenue recognition is included in the revenue recognition forecast, the All Project Included field will be enabled. The date on which forecast is created is updated in the Date Created field.
Add/ Update Forecast Lines
User can enter Percentage of Completion (POC) and the accumulated simulated cost until selected accounting period in the Accumulated Amounts tab. Revenue and cost amounts to recognize will be updated upon saving these amounts. If you update the modified estimates, revenue and cost amounts to recognize will be changed accordingly. It is possible to add or remove accounting periods from the forecast. When the forecast line is created, it is in Under Review status. After the amounts are calculated, users and confirm those lines by changing status to Confirmed. Then the ID of the user who confirmed the forecast line and the date of confirmation will be updated in each forecast line.
When calculating revenue recognition amounts, if zero margin rule for POC is applied, it will be indicated in the 0% Margin Rule Applied from field.
When calculating revenue recognition amounts for projects with Event Based revenue recognition method, if Apply Gate POC is enabled for the project, it will be indicated in the Gate POC Applied field.
Amounts in the Period Amounts tab is for analysis purpose only. Therefore, users are not allowed to modify amounts in this tab. If the latest revenue recognition information is available for the project, period amounts will be calculated from the immediate next period from the latest revenue recognition information. Both accumulated amounts and period amounts can be graphically analyzed per period.
Status Handling of the Revenue Recognition Forecast
Revenue recognition forecast is created in Preliminary status. After all forecast lines of the project is confirmed, you can change the status of the forecast to Reviewed. Then it is possible to set status to Approved. Once approved, user ID of the approver and the date of approval will be updated. If forecasts of all projects connected to the selected revenue recognition forecast are approved, All Approved will be enabled. If you cancel approval, the status will be changed to Reviewed. If you want to do further changes in the forecast lines, select the command Set as Preliminary to change the status to Preliminary.
Add/ Copy Projects to Existing Revenue Recognition Forecast
If the status of the revenue recognition forecast is Preliminary, you can add/copy projects to existing forecast. If you add projects, forecast lines will be generated based on the period profile connected to the forecast. If you copy projects, forecast lines of the original forecast will be copied to current forecast without considering period profile of the current forecast.
Revenue Recognition Forecast Project
In order to view all revenue recognition forecasts connected to a project, select the command Revenue Recognition Forecast Project in the General Ledger/ Project page.