SAP RAR Optimized Contract Management: Acceptance Date Manual Fulfillment Business Use Case

In this blog post I will be focusing on SAP Revenue accounting and reporting (RAR) Event-Based Fulfillment Type – Acceptance Date of Performance Obligations. A performance obligation (POB) can be fulfilled when a specified event happens which is Event-Based Fulfillment. A performance obligation can be fulfilled over a period of time which is Time-Based Fulfillment. Manual fulfillment occurs when an event is manually updated. For example, when a customer confirms a delivery has arrived, and the acceptance date is maintained as the fulfillment event in the system.

Performance Obligation Types

The goods or services that are promised in the contract represent a single performance obligation. SAP RAR has performance obligation types, and this represents data which addresses queries on fulfillment type; if it is Time or Event Based, and also specifies about the duration.

IMG Path – Financial Accounting > Revenue Accounting > Revenue Accounting Contracts > Define Performance Obligation Types

Fulfillment Event Types 

On the occurrence of an event, Performance obligations can be fulfilled. They can also be fulfilled over a period of time, starting from the occurrence of an event.

IMG Path – Financial Accounting > Revenue Accounting > Revenue Accounting Contracts > Define Fulfilment Event Types

How the Acceptance Date Process Is Integrated in Sales and Distribution with Revenue Accounting?

1. The revenue contract is created based on sales order.
2. Goods issue and creation of billing document are generated. The cost of goods sold (COGS) is posted in the operational system, based on goods issue. The COGS is then corrected in Revenue Accounting.
3. The acceptance date is entered in the sales order. When the sales order is saved, a fulfillment event is triggered. Revenue Accounting generates revenue and cost recognition postings using the order quantity as the fulfillment quantity and the acceptance date as the fulfillment event date.

Use Case

Company enters into a contract with customer (17100005) for 30,000 USD for providing Hi-Tech Equipment (TG10) together with Consumable Spare Parts (TG12) and Warranty (SM001) of during contract validity from 1^st October 2022 to 31^st January 2023 (4 months).

Calculation Check Points:

• Allocated Amount = Standalone Selling Price of Item X Complete Contractual Price / (Sum of all Stand-Alone Selling Price (SSP))
• Allocation Effect = Allocated Amount – Contractual Price of Item

Step 1: Value Contract

We start with Value Contract creation with materials & services associated with agreement.

Step 2: Sales Order

With reference to value contract further Sales Order is created and condition type PPR0, Standalone Sales Price (SSP) will be manually updated at every item level for testing but without SSP system will not save the Sales Order.

Step 3: Process Revenue Accounting Item’s related to Sales Order                      (Step 1)

For many entities, Step 1 will be straight forward; the key point is to determine when a contract exists. Using Tcode FARR_RAI_MON or Fiori App Manage Revenue Accounting Items, all sales order items will be showcase initially as processable RAI’s. Then all such processable RAI’s are transferred using default sender integration component as SD with RAI class as SD01 with source document item type as SDOI to RAR.

View RAR Contract and Performance Obligations (POB’s)                                    (Step 2)

Through Tcode FARR_RAI_MON or Fiori App Manage Revenue Accounting Items, all sales order items will be showcase initially as processable RAI’s. Such processable RAI’s are further transferred collectively or individually transfer to RAR. Once RAI’s are processed successfully, in 1^st step system will automatically create one Revenue Recognition Contract 1000000200 against one Sales Order and in 2^nd step Performance Obligations 2000002000/01/02 for each Sales Order items.

RAR Contract – Price Allocation                                                                             (Step 3, 4)

As per IFRS 15 prerequisite, RAR component will automatically perform the allocation amount and allocation effect against each Performance Obligation. This determines transaction price and allocate to the separate POB’s level.

Step 4: SD – Outbound Delivery and Post Goods Issue

With reference to Sales Order, Outbound Delivery and PGI done for material relevant order items.

Step 5: Revenue Accounting Item’s related to PGI

In transaction FARR_RAI_MON or Fiori App Manage Revenue Accounting Items, all fulfillment items related to order will be showcase initially as processable RAI’s. Then all such processable RAI’s are transferred using default sender integration component as SD with RAI class as SD02 with source document item type as SDFI to RAR.

Step 6: Acceptance Date Update

Acceptance Date updated in Line item of Sale order manually.

Step 7: Process Revenue Accounting Item’s related to Fulfillment

In transaction FARR_RAI_MON or Fiori App Manage Revenue Accounting Items, all fulfillment items related to order will be showcase initially as processable RAI’s. Then all such processable RAI’s are transferred using default sender integration component as SD with RAI class as SD02 with source document item type as SDFI to RAR.

RAR Contract – Revenue Schedule (After Fulfillment)                                           (Step 5)

This is the final step to determine for each POB when revenue should be recognized. Revenue is recognized when POB is fulfilled – that is when goods are posted, or acceptance date is updated, or services are eligible for post. The system records costs and recognizes revenue based on allocated amounts. The goods issue posting, or acceptance date update triggers real time creation of the revenue entry recording contract asset based on the allocated revenue.

Step 8: Customer Billing

Customer billing is posted.

Step 9: Process Revenue Accounting Item’s related to Billing

In transaction FARR_RAI_MON, All Invoice Items related to billing will be showcase initially as processable RAI’s. Then all such processable RAI’s are transferred using default sender integration component as SD with RAI class as SD03 with source document item type as SDII to RAR.

Summary of RAR Contract – Revenue Schedule (After Fulfillment)

In transaction FARR_RAI_MON, RAR Contract details will be displayed with all information related to Order Items, Fulfillment Items and Invoice Items.

In October we can see 25% completion of the Service Item

In December we can see 75% completion of the Service ItemService item will be 100% completed by the end of contract period which is 4 months in this case.

We can also see the document flow in Fiori App – Manage Revenue Contracts as below:

This brings us to end of test case of RAR Use Case for Event-Based Fulfillment of Performance Obligations – Acceptance Date.

Hope you find this blog informative and helpful.

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Thanks,

Jitakshi