Issues around recognising revenue are relevant to project based companies who may use a variety of triggers within the project to justify taking revenue. It is also relevant for any company delivering services over a timeframe that is not simultaneous with the invoices or acceptance of sales orders, for example a maintenance agreement where the client pays up front or the delivery of software services paid for annually in advance.
In May 2014 the Financial Accounting Standards Board and the International Financial Accounting Standards Board issued new common guidelines for recognising revenue in contracts under ASC 606 and IFRS 15. NetSuite released a new module in 2015 to support this standard known as Revenue Recognition.
This module was expanded and updated in 2016 release 1 and is now known as Advanced Revenue Management, reflecting the broader enhancements. The plans for Advanced Revenue Management in release 2016.2 further enhance it making it easier to use including the automation of otherwise tedious regular functions.
These 2016.1 features included
- Re-forecast revenue plan
- Enhanced revenue forecasting report
- Enhanced deferred revenue waterfall report
- Arrangement level option for unbilled receivable adjustment (reclassification 3rd step)
- Book specific item revenue attribute definition
- Revenue arrangement approval routing
- Various usability enhancements
With advanced revenue management revenue can be deferred for recognition across future periods according to configurable rules. It supports fair values based on vendor-specific objective evidence (VSOE), best estimate of selling price (ESP), third party evidence (TPE), and other fair value methods. These fair values are used to determine the revenue allocation ratios for multi-element transactions.
The following records and transactions are used in advanced revenue management:
- Revenue arrangements – Transactions that record the details of customer performance obligations for purposes of revenue allocation and recognition. Advanced revenue management automatically creates revenue arrangements from predefined revenue sources, such as sales transactions. The arrangements from multiple revenue sources can be consolidated.
- Revenue elements – Records that correspond to individual lines in a source. Revenue elements are attached as lines on a revenue arrangement.
- Revenue recognition rules – Records that define patterns for revenue recognition. They include, for example, the recognition method, amount source, and start and end date sources.
- Revenue recognition plans – Records that indicate the posting periods in which revenue should be recognized and the amount to be recognized in each period. Revenue plans are derived from revenue recognition rules. Each revenue element has a forecast plan and one or more actual plans. The actual revenue plans control the posting of revenue.
- Fair value price list – List of the records that define the fair value for items. Fair value price is used to allocate revenue in revenue arrangements.