Project - Revenue recognition

Hi @rkmcamani ,

Event-Based Revenue Recognition in IFS is a feature designed to calculate and manage revenue recognition based on specific events rather than relying solely on time-based or percentage-of-completion methods. This approach allows for a more tailored and accurate recognition of revenue according to predefined project milestones or triggers.

Event-Based Revenue Recognition uses predefined events (milestones, deliverables, or other significant project achievements) to determine when and how revenue should be recognized. This is particularly useful for projects where revenue should be recognized based on the completion of specific tasks or milestones rather than on a time basis or project progress.

How It Works

1. Define Revenue Recognition Events:

• Events Definition: In IFS, you define events related to revenue recognition in the project setup. These events represent milestones or achievements that trigger revenue recognition.
• Event Configuration: Each event needs to be configured with specific details such as event type, trigger conditions, and revenue amount associated with it.

2. Set Up Event-Based Revenue Recognition:

• Event Setup: Within the project, you configure the revenue recognition method to be event-based.
• Link Events: Ensure that the defined events are linked to the appropriate revenue lines or cost elements within the project.

3. Perform Revenue Recognition:

• Event Triggers: When you perform revenue recognition, IFS checks whether any of the predefined events have been met or triggered.
• Revenue Calculation: Revenue is recognized based on the occurrence of these events. If an event is reached (for example, a milestone is completed), revenue associated with that event is recognized.

If revenue recognition is not reflecting the defined events, here are some potential issues and troubleshooting steps:

1. Ensure that events are correctly defined and linked to the appropriate project lines or cost elements. Verify that the events have been properly set up in the system.
2. Verify if the conditions for triggering the events are met. If the criteria for the event are not fulfilled (e.g., the milestone or condition hasn't occurred), revenue will not be recognized based on that event.
3. Check if the project or revenue line is set up to use event-based recognition. Sometimes, settings might be configured to use another method (e.g., percentage-of-completion or time-based recognition).
4. Verify the revenue recognition rules applied to your project. Make sure there’s no conflict between the event-based rules and other revenue recognition methods that might override or affect the calculation.

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Best regards,

Thakshila

HI Thakshila,

Your answer provided lot of insight.

We need one more help. Can you please advise how can we link event with the project lines or cost element/revenue element. That will be really helpful. If you can attach a screenshot of screen where we link them, that will be great.

That is a great explanation and a lot of insight. @Thakshila Chandrasiri  

Hi @rkmcamani 

I hope the below facts also help you.

In IFS Applications 10, a new feature called event-based revenue recognition was introduced for projects. This means that revenue and costs are tied to a project, which can be set to be capitalized. Each performance obligation under IFRS15 is tracked as an event, with its own revenue and cost. When an event is marked as fully or partially completed, IFS automatically recognizes the related revenue and cost.

I’ve attached a presentation I found in the IFS community that explains this further, and I hope it helps you.

https://ifs-my.sharepoint.com/personal/craig_jepson_ifs_com/_layouts/15/onedrive.aspx?id=%2Fpersonal%2Fcraig%5Fjepson%5Fifs%5Fcom%2FDocuments%2FDocuments%2FPreSales%2FProspects%2FSecto%2FEventBasedRevenueRecognition%2Epdf&parent=%2Fpersonal%2Fcraig%5Fjepson%5Fifs%5Fcom%2FDocuments%2FDocuments%2FPreSales%2FProspects%2FSecto&ga=1

Regards,

Chanuka

Thanks Chanu,

It was helpful.

Happy to help you with this.

Regards,

Chanuka