In this series, we answer real-life questions from Acumatica users
QUESTION: How do the different revenue recognition methods in Acumatica affect revenue recognition?
ANSWER: Recognition methods determine how a deferred revenue or expense amount will be distributed over a defined number of periods. Within Acumatica, you can specify a particular recognition method in the settings of each deferral code on the Deferral Codes form, and can assign a deferral code to a line of an invoice or bill. Revenues can be deferred in a number of ways and over different time periods that you select. Besides choosing a recognition method, you must input the beginning and end dates.
Acumatica enables you to choose the revenue recognition method that best meets your needs. Following are examples of five recognition methods that can be selected within Acumatica ERP, including:
- Evenly by Periods
- Evenly by Periods, Prorate by Days
- Evenly by Days in Period
- Flexible by Periods, Prorate by Days
- Flexible by Days in Period
The screen below shows an invoice generated in Acumatica for $7,500 of revenue that is recognized evenly over a five-quarter schedule:
Evenly by Periods
With the Evenly by Periods recognition method, the amount to be recognized is distributed evenly among all included periods. The number of recognition periods is defined by the value you specify in the Occurrences box for the deferral code on the Deferral Codes form.
The screen below shows how you set the Deferral Code for Quarterly Evenly by Periods over a three-period range:
The screen below shows the deferral schedule that is generated:
Evenly by Periods, Prorate by Days
With the Evenly by Periods, Prorate by Days method, the amount to be recognized is distributed evenly among recognition periods (the number of which is defined by the value specified in the Occurrences box on the Deferral Codes form). The first and last periods are counted together as one recognition period and the amount to be recognized for each is proportional to the number of days in each period.
The frequency of occurrences depends on the number of financial periods you select in the Every X Period(s) box. The installment amounts for the first and last periods are calculated based on a full-period amount that is proportional to the number of days each installment should cover.
The screen below shows how you set the Deferral Code for Quarterly Evenly by Periods, Prorate Days over a three-period range:
The screen below shows the deferral schedule that is generated:
Evenly by Days in Period
With the Evenly by Days in Period method, the amount to be recognized is distributed by periods with a proportional division by the number of calendar days in each period. The number of recognition periods is defined by the value specified in the Occurrences box in the deferral code settings on the Deferral Codes form. An occurrence is a recurring recognition event for which a recognition transaction is generated. The frequency of occurrences depends on the number of financial periods you select in the Every X Period(s) box.
The screen below shows how you set the Deferral Code for Quarterly Evenly by Days in Period over a three-period range:
The screen below shows the deferral schedule that is generated:
Flexible by Periods, Prorate Days
With the Flexible by Periods, Prorate by Days method, the amount to be recognized is distributed evenly among periods, with a proportional division by days among the first and last periods. The first and the last periods may be less than a full period, depending on the start recognition date and the final recognition date specified in a particular document (such as AR invoice). The number of recognition periods is defined by the recognition dates specified in a document.
The screen below shows how you set the Deferral Code for Flexible by Periods, Prorate Days:
The screen below shows the deferral schedule that is generated:
Flexible by Days in Period
With the Flexible by Days in Period method, the amount to be recognized is distributed among periods, according to the number of calendar days in each particular period. The start date and the final date of the recognition process is specified individually for each line of a particular AR document (such as AR invoice or cash sale).
The screen below shows how you set the Deferral Code for Flexible by Days in Period:
The screen below shows the deferral schedule that is generated:
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