Oracle Revenue Management Overview
– Oracle Cloud Oracle Cloud Financial The core principle of ASC 606 and IRFS 15 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606:
Revenue from Contracts with Customers. In the US, this rule was issued by the Financial Accounting Standards Board Perhaps the biggest difference between the old regulation and the new is that you now review revenue at inception of the sales order.
You identify contracts and performance obligations without any dependencies on actual billing of the customer Deferred Revenue Accounting replaced with performance obligation Accounting.
Issue with deferred Revenue Accounting is that-deferred revenue was classified as a liability but it did not meet the definition of a liability You don’t owe it to anybody
You are just sitting on it until it is allowed to be recognized Performance Obligation When a contract is identified in Revenue Management, each line item in the contract is a performance obligation.
When the performance obligation is satisfied, revenue is recognized.
In this example, one contract is created with three lines. Line 1 is for the smart phone and line 2 the voice plan and line 3 the data plan. Revenue is recognized for the smart phone on the day the customer physically receives the phone. The revenue for the voice and data plans are recognized for $50.01 and $33.34 for the first month. Subsequent months amounts are calculated based on the number of days in each month.
RMCS CONFIGURATION
System Option
Source Document Type
Contract Identification Rule
Contract Identification Rule
Performance Obligation Identification Rule
Pricing Setup (Part Of Order Management Pricing Strategy)
