12/11/2023

Revenue and Cost Accounting

SAP S/4HANA Cloud | 2308.3

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Original content: https://help.sap.com/docs/SAP_S4HANA_CLOUD/89d896ca9cd64318b1667df5ec00e4b2?locale=en-

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 12/11/2023

Revenue Recognition Methods for Customer Projects

The revenue recognition methods are derived from the four available contract types for customer projects: Fixed Price, Periodic
Service, Time & Expenses, and Usage-Based.

Fixed Price

Posting Logic Revenue Recognition Key SPFCQ

Here we explain the posting logic behind the revenue recognition key SPFCQ (used for customer projects). It allows you to
recognize revenue on quantity-based percentage of completion (POC) using planned hours from estimation at completion and
plan revenue from billing plan.Here we explain the posting logic behind the revenue recognition key SPFCSC (used for customer
projects). It allows you to recognize revenue on a cost-based POC similar to the existing SPFC recognition key. Projects,
however, are considered to be completed statically and not time-dependently.

Usually, after you have assigned the revenue recognition key to the xed price contract, Event-Based Revenue Recognition
triggers postings in Financial Accounting accordingly.

The difference between SPFC and SPFCQ revenue recognition keys is the calculation of the POC. For SPFC, the POC is
calculated based on the relation from actual costs to planned costs. For SPFCQ, the POC calculated is measured by the working
hours of the posting. This makes a difference for travel expense posting as they are included in the POC for the SPFC key but
not in the SPFCQ recognition key. Any quantity which is based on a time unit is taken into account for the POC calculation.

Invoices are posted by the primary posting to an income statement account and are reposted by revenue recognition to
deferred revenue. The currency amounts for deferred revenue are copied from the primary posting.

Period-end closing re-evaluates the total recognized revenue by the actual POC which is limited to 100%. Period-end closing
also does the balance sheet clearing between accrued and deferred revenue. These calculations are executed using the
principal currency.

Let’s assume that the following parameters are de ned for your project:

Customer project with xed price contract type

Cost rate: EUR 45/h

Planned costs: EUR 450 (10 h)

Planned revenue: EUR 800 (10 h)

Time con rmation: 1 h

Billing amount: EUR 800

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The following graphic shows you the process steps for this method and the corresponding postings:

Here we explain the posting logic behind the revenue recognition key SPFCSC (used for customer projects). It allows you to
recognize revenue on In event (1), the staffed consultant records 1-hour of work on the project. Costs are posted from the cost
center to the project account. Consequently, the project and cost center are updated respectively by EUR 45. Since revenue and
cost are recognized simultaneously with the time con rmation posting, the corresponding revenue is recognized in event (1a)
based on the POC (in this case 10%). Hence, the Event-Based Revenue Recognition posting debits the Accrued Revenue
account and credits the Revenue Adjustment account by EUR 80.

With Billing in event (2), a billing document is created based on the billing plan for the contract/ project. A journal entry is
created for the invoice in Finance debiting the Receivables account and crediting the Billed Revenue account. The posting of the
billing document triggers Event-Based Revenue Recognition leading to a revenue correction in event (2a). Event-Based Revenue
Recognition reposts billed revenue to deferred revenue. Hence, the posting debits the Revenue Adjustment account and credits
the Deferred Revenue account by EUR 800.

In event (3), with the period-end closing, which can be done in the Run Revenue Recognition – Projects app, Event-Based
Revenue Recognition revalues the balance sheet position of the selected project. The balance of Accrued Revenue and
Deferred Revenue is cleared, i.e. position results in Deferred Revenue of EUR 720. The period-end closing also calculates the
currency effects depending on the chosen currency handling.

A difference in the posting logic between SPFC and SPFCQ would occur in case of unplanned travel expenses. Such travel
expenses would affect the POC calculation of the SPFC recognition key. Since they are not a time unit, they do not affect the
POC calculation for recognition key SPFCQ.

Posting Logic Revenue Recognition Key SPFCSC

Usually, after you have assigned the revenue recognition key to the xed price contract, Event-Based Revenue Recognition
triggers postings in Financial Accounting accordingly.

The revenue recognition key works similar to the SPFC key, but it has a different handling with the status Completed.

Let’s say that a project runs from April 1 to May 31. On June 6, the project is set to Completed. Until project completion, all
postings are identical to the SPFC postings. However, by using the revenue recognition key SPFC, the clearing postings would
occur in the revenue recognition run in June as this is the month when the project was set to Completed. Using the key
SPFCSC, the clearing postings occur in the revenue recognition run in May as this is the month where the project ends,
independent of the project status.

Let’s assume that the following parameters are de ned for your project:

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Customer project with xed price contract type

Cost rate: EUR 45/h

Planned costs: EUR 450 (10 h)

Planned revenue: EUR 800 (10 h)

Time con rmation: 1 h

Billing amount: EUR 800

Project duration: April 1 - May 31

The following graphic shows you the process steps for this method and the corresponding postings:

In event (1), the staffed consultant records 1-hour of work on the project. The cost center of the employee is credited by EUR 45
while the project is debited by EUR 45. Since revenue and cost are recognized simultaneously with the time con rmation
posting, the corresponding revenue is recognized in event (1a) based on the POC (in this case 10%).

With Billing in event (2), a billing document is created based on the billing plan for the contract/project. A journal entry is
created for the invoice in Finance debiting the Receivables account and crediting the Billed Revenue account. The posting of the
billing document triggers Event-Based Revenue Recognition leading to a revenue correction in event (2a). Event-Based Revenue
Recognition reposts billed revenue to deferred revenue. Hence, the posting debits the Revenue Adjustment account and credits
the Deferred Revenue account by EUR 800.

In event (3), with the period-end closing, which can be done in the Run Revenue Recognition – Projects app, Event-Based
Revenue Recognition revalues the balance sheet position of the selected project. The balance of Accrued Revenue and Deferred
Revenue is cleared.

With the period-end closing at the end of May in event (4), all accruals and deferrals are removed as this is the static point
where the project is considered Completed for Event-Based Revenue Recognition. Regardless of whether the project status has
been set to completed or not, revenue and costs are fully recognized at this point in time. This follows the logic that a
consultant cannot post any hours on the project in June as the project duration does not allow them to do so.

Posting Logic Revenue Recognition Key SPFCTR

Here we explain the posting logic behind the revenue recognition key SPFCTR (used for customer projects). It allows you to
recognize revenue on a cost-based POC similar to the existing SPFC revenue recognition key using planned costs from
estimation at completion and plan revenue from billing plan.

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Usually, after you have assigned the revenue recognition key to the xed price contract, Event-Based Revenue Recognition
triggers postings in Financial Accounting accordingly.

This method does equal postings to the SPFC revenue recognition method in the nancial area of the system. However, it
provides a more detailed margin reporting based on employees as it incorporates origin pro t center postings based on the
pro t center of the employee.

Let’s say that a project manager assigns a consultant from Pro t Center YB101 to a project which has the pro t center YB102.
After time recording of the consultant, in real-time processing, accrued revenue is created based on the change of the POC as
measured by the costs of the posting. The amounts of the accrued revenues are posted using the currency which is given by the
planned revenue as document currency.

Let’s assume that the following parameters are de ned for your project:

Customer project with xed price contract type

Cost rate: EUR 45/h

Planned costs: EUR 450 (10 h)

Planned revenue: EUR 800 (10 h)

Time con rmation: 1 h

Billing amount: EUR 800

Project pro t center: YB102

Employee pro t center: YB101

Sales rate for employee from pro t center YB101: EUR 120/h

The following graphic shows you the process steps for this method and the corresponding postings:

In event (1), the staffed consultant records 1-hour of work on the project. The cost center of the employee is credited by EUR 45
while the project with its respective pro t center is debited by EUR 45. Since revenue and cost are recognized simultaneously
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 12/11/2023
with the time con rmation posting, the corresponding revenue is recognized in event (1a) based on the POC (in this case 10%).
In addition to the regular revenue adjustment, another posting is made to the Target Revenue account debiting the pro t
center of the project and crediting the pro t center of the employee. The amount posted as target revenue is calculated by a
time and expense invoice simulation for the time con rmation. This enables you to perform a detailed margin reporting at
employee level.

With Billing event (2), a billing document is created based on the billing plan for the contract/project. A journal entry is created
for the invoice in Finance debiting the Receivables account and crediting the Billed Revenue account. The posting of the billing
document triggers Event-Based Revenue Recognition leading to a revenue correction in event (2a). Event-Based Revenue
Recognition reposts billed revenue to deferred revenue. Hence, the posting debits the Revenue Adjustment account and credits
the Deferred Revenue account by EUR 800.

In event (3), with the period-end closing, which can be done in the Run Revenue Recognition – Projects app, Event-Based
Revenue Recognition revalues the balance sheet position of the selected project. During this calculation, the POC is limited to
100%. The actual POC is calculated based on the total costs incurred up to the calculation period and the actual plan costs.
Furthermore, the balance of Accrued Revenue and Deferred Revenue is cleared during the period-end closing.

Posting Logic Revenue Recognition Key SPTCCM

Here we explain the posting logic behind the revenue recognition key SPTCCM (used for customer projects). It allows you to
recognize revenue for xed price projects based on the method completed contract similar to the SPFCCM recognition key.

Usually, after you have assigned the revenue recognition key to the xed price contract, Event-Based Revenue Recognition
triggers postings in Financial Accounting accordingly.

This revenue recognition method has the same base method as the SPFCCM recognition key. However, completion of the
project is considered at a different point in time.

Let’s say that a project runs from April 1 to May 31. On June 6, the project is set to the status Completed. Until project
completion, all postings are identical to the SPFCCM postings. Using the revenue recognition key SPFCCM, clearing postings
would occur in the revenue recognition run in May as this is the month when the project duration ends. By using the SPTCCM
revenue recognition key, the clearing postings occur in the revenue recognition run in June as this is the month when the project
was technically set to the status Completed.

Let’s assume that the following parameters are de ned for your project:

Customer project with xed price contract type

Cost rate: EUR 45/h

Planned costs: EUR 450 (10 h)

Planned revenue: EUR 800 (10 h)

Time con rmation: 1 h

Billing amount: EUR 800

Project duration: April 1 - May 31

This is custom documentation. For more information, please visit the SAP Help Portal 6
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The following graphic shows you the process steps for this method and the corresponding postings:

In event (1), the staffed consultant records 10-hours of work on the project. Costs are posted from the cost center to the project
account. Consequently, the project and cost center are updated by EUR 450. Neither revenue nor cost are recognized with the
time con rmation posting. In event (1a), costs are deferred completely. Hence, the Event-Based Revenue Recognition posting
debits the Deferred Cost account and credits the Cost Adjustment account by EUR 450.

With Billing in event (2), a billing document is created based on the billing plan for the contract/project. A journal entry is
created for the invoice in Finance debiting the Receivables account and crediting the Billed Revenue account. The posting of the
billing document triggers Event-Based Revenue Recognition leading to a revenue correction in event (2a). As revenue is realized
only with the period-end closing after completion of the project, Event-Based Revenue Recognition reposts billed revenue to
deferred revenue. Hence, the posting debits the Revenue Adjustment account and credits the Deferred Revenue account by
EUR 800.

In event (3), after the project status is set to Completed, the period-end closing can be done with the Run Revenue Recognition
– Projects app. Event-Based Revenue Recognition revalues the balance sheet position of the selected project. The balances of
cost and revenue are cleared, i.e. Deferred Cost and Deferred Revenue are netted. The period-end closing also calculates the
currency effects depending on the chosen currency handling. Please note that the revenue is only realized after the project
status is set to Completed regardless of whether the project has already ended which means that the project end date is not
considered. This is the difference to the SPFCCM recognition key with which all revenues are recognized in the month in which
the project ends or after project status is set to Completed before the project end date.

Posting Logic Revenue Recognition Key SPFC

Here we explain the posting logic behind the revenue recognition key SPFC (used for customer projects). It allows you to
recognize revenue on cost based POC using plan costs from estimation at completion and plan revenue from billing plan.

Usually, after you have assigned the revenue recognition key to the xed price contract, Event-Based Revenue Recognition
triggers postings in Financial Accounting accordingly.

Let’s assume that the following parameters are de ned for your project:

Customer project with xed price contract type

Cost rate: EUR 45/h

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 12/11/2023
Planned costs: EUR 450 (10 h)

Planned revenue: EUR 800 (10 h)

Time con rmation: 1 h

Billing amount: EUR 800

The following graphic shows you the process steps for this method and the corresponding postings:

In event (1), the staffed consultant records 1-hour of work on the project. Time Recording will credit the cost center and debit
the project by EUR 45. Since revenue and cost are recognized simultaneously with the time con rmation posting, the
corresponding revenue is recognized in event (1a) based on the POC (in this case 10%). Hence, the Event-Based Revenue
Recognition posting debits the Accrued Revenue account and credits the Revenue Adjustment account by EUR 80.

With Billing in event (2), a billing document is created based on the billing plan for the contract or project. A journal entry is
created for the invoice in Finance, debiting the Receivables account and crediting the Billed Revenue account. The posting of
the billing document triggers Event-Based Revenue Recognition leading to a revenue correction in event (2a). Event-Based
Revenue Recognition reposts billed revenue to deferred revenue. Hence, the posting debits the Revenue Adjustment account
and credits the Deferred Revenue account by EUR 800.

In event (3), with the period-end closing, which can be done in the Run Revenue Recognition – Projects app, Event-Based
Revenue Recognition revalues the balance sheet position of the selected project. During this calculation, POC is limited to
100%. The actual POC is calculated based on the total costs incurred up to the calculation period and the actual plan costs.
Furthermore, the balance of Accrued Revenue and Deferred Revenue is cleared up during period-end closing.

Posting Logic Revenue Recognition Key SPFCCM

Here we explain the posting logic behind the revenue recognition key SPFCCM (used for customer projects). It allows you to
recognize costs and revenue as occurred when a project is nally billed or completed. Until then costs and revenue will be
deferred.

Usually, after you have assigned the revenue recognition key to the xed price contract, Event-Based Revenue Recognition
triggers postings in Financial Accounting accordingly.

Let’s assume that the following parameters are de ned for your project:

Customer project with xed price contract type

Cost rate: EUR 45/h

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 12/11/2023
Planned costs: EUR 450 (10 h)

Planned revenue: EUR 800 (10 h)

Time con rmation: 10 h

Billing amount: EUR 800

Project duration: April 1 - May 31

The following graphic shows you the process steps for this method and the corresponding postings:

In event (1), the staffed consultant records 10-hours of work on the project. Costs are posted from the cost center to the project
account. Consequently, project and cost center are updated by EUR 450. Neither revenue nor cost are recognized with the time
con rmation posting. In event (1a), costs are deferred completely. Hence, the Event-Based Revenue Recognition posting debits
the Deferred Cost account and credits the Cost Adjustment account by EUR 450.

With Billing in event (2), a billing document is created based on the billing plan for the contract or project. A journal entry is
created for the invoice in Finance debiting the Receivables account and crediting the Billed Revenue account. The posting of the
billing document triggers Event-Based Revenue Recognition leading to a revenue correction in event (2a). As revenue is realized
only with period-end closing after completion of the project, Event-Based Revenue Recognition reposts billed revenue to
deferred revenue. Hence, the posting debits the Revenue Adjustment account and credits the Deferred Revenue account by
EUR 800.

In event (3), the period-end closing can be done with the Run Revenue Recognition – Projects app. The relevant To Period is the
period when the project ends (project end date). Event-Based Revenue Recognition revalues the balance sheet position of the
selected project. The balances of cost and revenue are cleared, i.e. Deferred Cost and Deferred Revenue are netted. The period-
end closing also calculates the currency effects depending on the chosen currency handling.

Posting Logic Revenue Recognition Key SPFCR

Here we explain the posting logic behind the revenue recognition key SPFCR (used for customer projects). It allows you to
recognize costs on revenue based POC using plan costs from estimation at completion. Plan revenue is based on billing plan.

Usually, after you have assigned the revenue recognition key to the xed price contract, Event-Based Revenue Recognition
triggers postings in Financial Accounting accordingly.

This is custom documentation. For more information, please visit the SAP Help Portal 9
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Let’s assume that the following parameters are de ned for your project:

Customer project with xed price contract type

Cost rate: EUR 45/h

Planned costs: EUR 450 (10 h)

Planned revenue: EUR 800 (10 h)

Time con rmation: 1 h

Billing amount: EUR 400

The following graphic shows you the process steps for this method and the corresponding postings:

In event (1), the staffed consultant records 1-hour of work on the project. Time recording credits the cost center and debits the
project by EUR 45. With the revenue-based POC applied, no revenues are recognized. Instead, costs are deferred completely
with the Event-Based Revenue Recognition posting in event (1a).

With Billing in event (2), a billing document is created based on the billing plan for the contract or project. A journal entry is
created for the invoice in Finance debiting the Receivables account and crediting the Billed Revenue account. The posting of the
billing document triggers Event-Based Revenue Recognition leading to a percentage of completion calculation based on
revenues. The POC is calculated as a division between planned and billed revenue. The cost adjustment posting in event (2a)
inherits that POC and multiplies it by the planned costs. In our example, the posting debits the Cost Adjustment account and
credits the Accrued Cost account by EUR 225.

In event (3), with the period-end closing, which can be done in the Run Revenue Recognition – Projects app, Event-Based
Revenue Recognition revalues the balance sheet position of the selected project. During this calculation, the POC is limited to
100%. The actual POC is calculated based on the total costs incurred up to the calculation period and the actual plan costs.
Furthermore, the balance of Accrued Revenue and Deferred Revenue is cleared during period-end closing.

Posting Logic Revenue Recognition Key SPNFC

Here we explain the posting logic behind the revenue recognition key SPNFC (used for customer projects). It allows you to
recognize costs and revenues as they occur.

Usually, after you have assigned the revenue recognition key to the xed price contract, Event-Based Revenue Recognition
triggers postings in Financial Accounting accordingly.

Let’s assume that the following parameters are de ned for your project:

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 12/11/2023
Customer project with xed price contract type

Cost rate: EUR 45/h

Planned costs: EUR 450 (10 h)

Planned revenue: EUR 800 (10 h)

Time con rmation: 1 h

Billing amount: EUR 800

The following graphic shows you the process steps for this method and the corresponding postings:

In event (1), the staffed consultant records 1-hour of work on the project. Time Recording will credit the cost center and debit
the project by EUR 45. Since no revenue recognition effects should be considered, costs are recognized with the posted amount.
Event-Based Revenue Recognition does not post any adjustment.

With Billing in event (2), a billing document is created based on the billing plan for the contract or project. A journal entry is
created for the invoice in Finance debiting the Receivables account and crediting the Billed Revenue account. Event-Based
Revenue Recognition does not post any adjustment.

The period-end closing is not relevant for this process as there are neither cost or revenue adjustments, nor any WIP postings
on the balance sheet side.

Periodic Service

Posting Logic Revenue Recognition Key SPNPC

Here we explain the posting logic behind the revenue recognition key SPNPC (used for customer projects). It allows you to
recognize costs and revenues as they occur without revenue recognition postings.

Usually, after you have assigned the revenue recognition key to the periodic service contract, Event-Based Revenue Recognition
triggers postings in Financial Accounting accordingly.

Let’s assume that the following parameters are de ned for your project:

Customer project with periodic service contract type

Service duration: 12 months

Cost rate: EUR 45/h

Planned costs: EUR 450 (10 h)

Planned revenue: EUR 800 (10 h)

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Time con rmation: 1 h

Billing amount: EUR 800

The following graphic shows you the process steps for this method and the corresponding postings:

In event (1), the staffed consultant records 1-hour of work on the project. Costs are posted from the cost center to the project
account. Consequently, the project and cost center are updated by EUR 45.

With Billing in event (2), a billing document is created based on the billing plan. A journal entry is created for the invoice in
Finance debiting the Receivables account and crediting the Billed Revenue account.

The period-end closing is not relevant for this process as there are neither cost/revenue adjustments, nor any WIP postings on
the balance sheet side.

Posting Logic Revenue Recognition Key SPPC

Here we explain the posting logic behind the revenue recognition key SPPC (used for customer projects). It allows you to
recognize costs and revenues following the billing plan.

Usually, after you have assigned the revenue recognition key to the periodic service contract, Event-Based Revenue Recognition
triggers postings in Financial Accounting accordingly.

Let’s assume that the following parameters are de ned for your project:

Customer project with periodic service contract type

Service duration: 12 months

Cost rate: EUR 45/h

Planned costs: EUR 450 (10 h)

Planned revenue: EUR 800 (10 h)

Time con rmation: 1 h

Billing amount: EUR 800

This is custom documentation. For more information, please visit the SAP Help Portal 12
 12/11/2023
The following graphic shows you the process steps for this method and the corresponding postings:

In event (1), the staffed consultant records 1-hour of work on the project. Costs are posted from the cost center to the project
account. Consequently, the project and cost center are updated by EUR 45. In event (1a), the posted costs are deferred
completely. Hence, the Event-Based Revenue Recognition posting debits the Deferred Cost account and credits the Cost
Adjustment account by EUR 45.

With Billing in event (2), a billing document is created based on the billing plan. A journal entry is created for the invoice in
Finance debiting the Receivables account and crediting the Billed Revenue account. The posting of the billing document triggers
Event-Based Revenue Recognition deferring the billing amount in event (2a). Hence, the posting debits the Revenue
Adjustment account and credits the Deferred Revenue account by EUR 800.

In event (3), with the period-end closing, which can be done in the Run Revenue Recognition – Projects app, Event-Based
Revenue Recognition revalues the balance sheet position of the selected project. Costs and revenue are recognized based on
the time-based POC, i.e. 1/12 of posted costs (EUR 3.75), respectively invoicing an amount of EUR 66.67. Hence, the posting of
Event-Based Revenue Recognition run debits the Cost Adjustment account and credits the Deferred Cost account by EUR 3.75.
Additonally, it debits the Deferred Revenue account and credits the Revenue Adjustment account by EUR 66.67. The period-end
closing also calculates the currency effects depending on the chosen currency handling.

Posting Logic Revenue Recognition Key SPPC1

Here we explain the posting logic behind the revenue recognition key SPPC1 (used for customer projects). It allows you to
recognize revenues following the billing plan and costs as occurred.

Usually, after you have assigned the revenue recognition key to the periodic service contract, Event-Based Revenue Recognition
triggers postings in Financial Accounting accordingly.

Let’s assume that the following parameters are de ned for your project:

Customer project with periodic service contract type

Service duration: 12 months

Cost rate: EUR 45/h

Planned costs: EUR 450 (10 h)

Planned revenue: EUR 800 (10 h)

This is custom documentation. For more information, please visit the SAP Help Portal 13
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Time con rmation: 1 h

Billing amount: EUR 800

The following graphic shows you the process steps for this method and the corresponding postings:

In event (1), the staffed consultant records 1-hour of work on the project. Costs are posted from the cost center to the project
account. Consequently, the project and cost center are updated by EUR 45. With the revenue recognition key SPPC1, costs are
recognized as they occur. Hence, Event-Based Revenue Recognition does not post any adjustment.

With Billing in event (2), a billing document is created based on the billing plan. A journal entry is created for the invoice in
Finance debiting the Receivables account and crediting the Billed Revenue account. The posting of the billing document triggers
Event-Based Revenue Recognition deferring the billing amount in event (2a). Hence, the posting debits the Revenue
Adjustment account and credits the Deferred Revenue account by EUR 800.

In event (3), with the period-end closing, which can be done with the Run Revenue Recognition – Projects app, Event-Based
Revenue Recognition revalues the balance sheet position of the selected project. Costs are already recognized. Hence, no
further posting is necessary. Revenue is to be recognized due to the time-based POC, i.e. 1/12 of the invoicing amount (EUR
66.67). As revenue is recognized for the rst period, the posting of Event-Based Revenue Recognition Run reduces the Deferred
Revenues and posts against Revenue Adjustment account by EUR 66.67.

Time & Expenses

Here we explain the posting logic behind the revenue recognition key SPNTM (used for customer projects). It allows you to
recognize costs and revenues as they occur.

Usually, after you have assigned the revenue recognition key to the time & expense contract, Event-Based Revenue Recognition
triggers postings in Financial Accounting accordingly.

Let’s assume that the following parameters are de ned for your project:

Customer project with time & expense contract type

Cost rate: EUR 45/h

Planned costs: EUR 450 (10 h)

Cost rate: EUR 45/h

Planned costs: EUR 450 (10 h)

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Sales price: EUR 80/h

Time con rmation: 1 h

The following graphic shows you the process steps for this method and the corresponding postings:

In event (1), the staffed consultant records 1-hour of work on the project. Costs are posted from the cost center to the project
account. Consequently, the project and cost center are updated respectively by EUR 45. Since no revenue recognition effects
should be considered, costs are recognized with the posted amount. Event-Based Revenue Recognition does not post any
adjustment.

With Billing in event (2), a billing document is created based on the actual costs (1 hour = 10%). A journal entry is created for
the invoice in Finance debiting the Receivables account and crediting the Billed Revenue account. The billing amount is
recognized and Event-Based Revenue Recognition does not post any adjustment.

The period-end closing is not relevant for this process as there are neither cost or revenue adjustments, nor any WIP postings
on the balance sheet side.

Posting Logic Revenue Recognition Key SPTM

Here we explain the posting logic behind the revenue recognition key SPTM (used for customer projects). It allows you to
recognize costs as they occur as well as revenues on time & expense-based invoice simulation.

Usually, after you have assigned the revenue recognition key to the time & expense contract, Event-Based Revenue Recognition
triggers postings in Financial Accounting accordingly.

Let’s assume that the following parameters are de ned for your project:

Customer project with time & expense contract type

Cost rate: EUR 45/h

Planned costs: EUR 450 (10 h)

Sales price: EUR 80/h

Time con rmation: 1 h

This is custom documentation. For more information, please visit the SAP Help Portal 15
 12/11/2023
The following graphic shows you the process steps for this method and the corresponding postings:

In event (1), the staffed consultant records 1-hour of work on the project. Costs are posted from the cost center to the project
account. Consequently, the project and cost center are updated respectively by EUR 45. Since revenue is to be recognized
based on an invoice simulation, event (1a) will recognize the revenue according to the hour that was posted in event (1). Hence,
the Event-Based Revenue Recognition posting debits the Accrued Revenue account and credits the Revenue Adjustment
account by EUR 80.

With Billing in event (2), a billing document is created based on the actual costs. A journal entry is created for the invoice in
Finance debiting the Receivables account and crediting the Billed Revenue account. The posting of the billing document triggers
Event-Based Revenue Recognition deferring the billing amount in event (2a). Hence, the posting debits the Revenue
Adjustment account and credits the Deferred Revenue account by EUR 80.

In event (3), with the period-end closing, which can be done in the Run Revenue Recognition – Projects app, Event-Based
Revenue Recognition revalues the balance sheet position of the selected project. The balances are cleared, i.e. Deferred
Revenue and Accrued Revenue are netted.

Usage-Based
The revenue recongition keys SPNTM and SPTM that are used for Periodic Service contract types are also used for the Usage-
Based contract types. See the respective section for examples of the posting logic.

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