It has been a requirement of many clients who have been on SAP Student lifecycle Management (SLcM) solution and want to use deferred revenue postings to manage their month-end reporting regarding actualization of their Revenues. This document will highlight the complete end to end process/configurations /technical considerations involved in Deferred Revenue (Time-Based) Postings in FI-CA and will help consultants, Business process owners and End users to understand the complete science behind deferred revenue postings.
What is deferred Revenue?
Deferred revenue is a liability because its a revenue that has not been earned and depicts services that are owed to a customer. As the service is delivered over time, it is recognized proportionally as revenue on the income statement.
In contract Accounting, You post time-based deferred revenues when: you are required to differentiate between revenue and deferred revenue in the general ledger, and the service from which the revenue arises will not be provided until sometime in the future, and the dates for the revenue recognition are already known. (Reference: SAP Help)
Below basic settings are mandatory to be done in the system for deferred revenue postings:
|IMG path||Financial Accounting ® Contract Account Receivable & Payable ® Business Transaction ® deferred revenue Postings®Maintain Account Determination for Time-Based Deferred Revenue Postings|
In application area, you need to enter your industry specific Application Area. In our Case, for SAP Higher Education & research (HER-SLcM), we will use: P – Public Administration
Posting Area: 1220 is used for Time based account determination for deferred revenue
Company Code: Will be used where deferred revenue postings required.
G/L Account: This will be the Revenue GL, used in FI-CA postings on the basis of which summary records are transferred to GL Accounting from FI-CA. In our example: 41001001 (Tuition Fee Revenue)
Delayed Revenue Account: This will be unearned GL (liability) which will be used to post unearned Income. In our example: 23001001 (Unearned Tuition Fee)
Financial Accounting ® Contract Account Receivable & Payable ® Business Transaction ® deferred revenue Postings ®Maintain Default Values for Transfer Posting Run
In posting Area 1221, you need to maintain the default document type, which will be used to make deferred revenue postings when Mass activity process will be used via T-code FPDR.
Whenever FI-CA document is posted (through Fee calculation in PIQST00 or in Mass PQ_FEE_CALC ), at the same time trigger table (FKKDEFREV) for deferred revenue posting is filled with the FI-CA document alongside its proposed deferred information.
Fee Calculation Run:
Once fee is posted, system will post FI-CA document. Where below Transaction would be made:
Fee Receivable Account (Contract Account) Debit 4000 USD
Tuition Fee revenue Credit 4000 USD
If you open the document and in document overview, go to Extras and click on deferred revenues, System will pop up another screen where You can find the proposed transactions for deferred Revenues:
The System has passed on entries to FKKDEFREV Table for that FI-CA document as per the criteria defined in event 1140. (I will explain in technical considerations about this Event)
In our example, we have three months period of service where we want to split our revenues. We have taken Student’s academic session dates as a service period for which Fee will be calculated & posted as deferred/actual. (Different institutions might have different criteria’s, which can be handled in Event 1140)
Once the proposal has been done. Then its time to run Mass activity T-code FPDR to post deferred revenue postings. The first FPDR run will make the below Transactions first where it will transfer all revenue posting to unearned. The dates play vital role in Deferred revenue postings. Here SOP should be designed to run Student’s real time fee runs in some specific dates and the same date then will be used first to make the initial transaction through FPDR to transfer all revenue to unearned. In our example, You can see, in date 25-02-2021, 4000 USD amount in positive is mentioned, is the same date when I run the fee calculation and posted the FI-CA document. So, First I will run the FPDR on this date to transfer My complete tuition fee revenue into Unearned Tuition Fee account.
You can run this mass activity on company code level or you can go to custom selections Tab and give any criteria. In our example, I am using the FI-CA document:
Once parameters are saved and schedule run is made:
System has done first transfer postings with below Transaction where all revenue are transferred to unearned on same posting date as of FI-CA posting date:
After posting of this FPDR run, if you go back to FI-CA document and check the deferred revenue lines: you will see tick mark line against 4000 USD amount line. It means, posting has been made successfully against document type DF which we mapped in configurations and system has taken respective GLs accordingly to post deferred transaction.
After that FPDR can be run as a closing month activity where we can use month end closing date to post our actual revenue transfer entry from Unearned revenue to Actual revenue.
If you just review the FI-CA document again: You will see FPDR on date 28.02.2021 has posted the document successfully and at bottom, we can see, out of our 4000 USD, 1333 USD has been actualized and 2666 USD still remain as unearned for next 2 months. So, same like, when closing run will be performed in coming months, postings will be done accordingly.
The process of deferred revenue (Time based postings) involves below Events to be activated and programmed as per user requirements. The document postings call below Events (functional modules) in sequence:
Use T-code FQEVENTS to search with numbers: 10,30,1140 etc.
Technical consultant can help you to make Z-copies of above functional modules and ABAP coding can be done as per user requirements.
Standard Functional Module FKK_DEFREV_0010, does not consider all Application areas to trigger deferred revenue postings, so first you need to set the Application area P- Public Administration can be used in deferred revenue postings. If application area is allowed then next functional module FKK_SAMPLE_1140_EXAMPLE is called, otherwise, system just exit and do not go for deferred revenue postings and does not fill up any data In table FKKDEFREV.
If funds management is active: The system transfers the FM account assignment from the original document to the deferred revenue posting automatically. To use this function, you have to include the structure IFKKFMOBJ in table FKKDEFREV.
Deferred Revenue process is critical for those organizations who want to properly manage their month end reporting process as functionality provided by SAP in Contract Account receivables and payables follow best business practice solution to manage this entire process.
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