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Variable Consideration Processing

This document explains the approach towards processing Variable Consideration(VC) within RevPro. The following topics are covered in this document:

  • Creating VC related setups
  • Creating VC Estimates through Transaction Upload
  • Updating to VC Estimates through Transaction Upload
  • Creating VC Estimates through Variable Consideration Upload
  • Update to VC Estimates through Variable Consideration Upload
  • Clearing Estimate (Actuals) through Transaction Upload and VC Upload
  • Clearing Estimate Final (Final Actuals) through Transaction Upload and VC Upload
  • Cancellation of previously processed Actuals and Final Actuals through Transaction Upload and VC Upload
  • Impact of VC in RC workbench
  • VC accounting

Assumptions

  • VC related accounts are set up correctly in Accounting Setups.
  • To support manual upload through VC, the system will provide a template with the data set, where users can update the VC Amounts to be cleared or updated.
  • Users should indicate to RevPro that the uploaded value is for clearing estimate, final actuals, replacing existing estimate, or cancelling actuals.
  • For VC Clearing when actuals are uploaded multiple times for a VC, it has to be incremental value and not cumulative.
  • For replacing VC Estimates when it is uploaded multiple times for a VC, it has to be a cumulative value.
  • In partially or fully cleared VC scenarios, if the estimate being changed is less than the total actuals, reject the record stating that the Estimated Amount cannot be less than the total actuals processed.
  • Estimated Amount is the total estimated amount for a VC. This denotes the latest processed VC estimate.
  • Accrued Amount is the total VC accrued based on the total amount booked, percentage of billing, or percentage of revenue released. As per the system, accrual entries are created based on the VC Type Create Accrual Accounting setup. Only if this flag is set to Yes, then Accrual entries are created. If Accrual Method is set to Upon Booking, accrual entries are to be created when the Sales Order is collected into the RC. Upon Billing, the system accrues upon invoicing of the sales order or upon revenue release of the sales order. Accrual entries are marked as Initial Reporting Entry flag as Yes.
  • When the setup for Accrual Accounting is set to Yes, the sample entries for VC Down case are as follows:
    Accounting Period Accounting Type Debit Credit Initial Reporting Entry Type
    JAN-16 Contract Liability 100   Y Accrual
    VC Liability   100 Y Accrual
    Contract Liability   100 N Revenue
    VC Liability 100   N Revenue

VC Application for Sales Order lines in an RC

Based on various setups described under the VC Setups section, the system automatically creates VC estimate when a Sales Order Line is collected into RevPro. This is the system applied VC. Users can create updates to the system applied VC or clear this VC using any of the 2 approaches defined below. The same approaches can also be used to create new estimates for sales order lines that do not have VC associated.

Approach for VC uploads

There will be a User Interface provided to upload the data manually and the following are the two approaches:

  • Approach 1: Under File Upload, there is a menu option for ‘Variable Consideration’ upload. The user can upload VC related data under separate template for either estimate or Actuals.
  • Approach 2: Under File Upload, there is a menu option for ‘Transactions/Cost’. The user can upload VC related data with the transaction type as INV-VC or CM-VC.

These approaches are explained in detail under VC Upload Section.

VC Setups

The below mandatory setups should be performed for VC to be applied in any transaction. The VC related accounts should be setup before configuring VC Types.

Accounting Setups

In Accounting setup, the VC related accounts need to be defined with VC Account enabled. A Liability account for accrual, a revenue account for VC revenue, and a Clearing account should be defined.

The balance sheet and income statement should be setup correctly. For the Clearing account, the VC Clearing account flag should be enabled.

Policies

For system applied VC, VC rules and POB mapping have to be created before any transaction is uploaded. If the transaction satisfies the VC rule and POB mapped with the VC type is applied to that transaction, then VC is auto-applied to that Sales Order line while creating the RC. In order to apply VC on a line that is already created, VC rules setup can be omitted.

  1. Select Policies > Variable Consideration. The Variable Consideration panel is displayed.
  2. Select Manage VC Fields. The Manage VC Fields panel is displayed.
  3. Select the required fields to be displayed for VC Stratification setup in Manage VC Fields panel.
Set Up VC Formula
  1. Select Manage VC Formulas link, and the Manage VC Formulas panel is displayed.
  2. Select New Formula to create a formula to be applied with the VC type. The New Formula panel is displayed.Select Uploaded Value from the Column field. This selection is mapped with the Formula field. This field stores the VC Apply Value percentage that has to be applied on the formula. The VC formula needs to be configured as below: The VC Apply Value of 10% in VC Rules as configured below would then be applied into the formula. If the sell Price of the SO line is $1000, the PA amount would be derived as $100 based on the formula and Apply Value.
  3. Select Manage VC Types. The Manage VC Types panel is displayed. A new VC type can be added by clicking the ‘+’ button on the right corner to define the VC and its stratification.
  4. (Optional) After defining the name and description, select Actual or Estimate from the Rule Type column.
  5. If Track by Quantity is checked then the Actuals Qty field in the VC Upload of Actuals can be populated. If this is not checked then even if the Actuals Qty is populated, it will not be considered.
  6. Select the account type as VC liability in the Balance Sheet field. 
  7. Select the account type for VC Revenue entries in the Income Statement field. 
  8. Select the account type for accrual of the Clearing entries in the VC Clearing Account field. 
  9. Select the Create Accrual Accounting checkbox in the Accrual Method column for the VC Accrual entries for Estimate and Actuals.

    If this option is not selected, then Accrual entries will not be created. The three Accrual Methods are:

    • Booking: Accrual entries are created upon Booking of the Order.
    • Billing: Accrual entries are created upon Billing of the Order, for example when an invoice is received. If Billing is partial then the Accrual entries will also be created partially.
    • Revenue Release: Accrual entries are created upon full or partial revenue recognition of the order. The accrual entries created will be proportional to the percentage of revenue release.
  10. Select the Enable check box to make the VC type available.

  11. The VC Type can be set for expiry by defining the following fields:
    • Expiry Base Date can be selected from the available date columns in the drop down. The expiry date is calculated based on the Date populated in the transaction upload for the respective date column mapped in the VC type.

    • Expiry Type can either be based on Days or Periods (Months). The Expiry date is calculated based on days or months, starting from the base date. The VC estimate for a particular Sales Order line will expire after the duration defined here while running the VC Expiry job in schedule jobs. After running the VC Expiry job, the expired amount is populated for the SO line unless the estimated amount has been cleared. This will reset the allocatable amount for the SO line and reallocation is triggered.

    • Expiry Value is populated to define the duration after which the VC will expire. If the Expiry Type is chosen as Days then the Expiry Value is taken in Days. In the example as shown in the figure below, the VC expires after RC Line Date + 4 days.

      If the Expiry type is chosen as Periods then the Expiry Value is taken in months. In the example as shown in the figure below, the VC expires after RC Line Date + 4 months.

VC Stratification Criteria

After the VC Type setup is done, VC stratification is defined to map the VC formula and to select the fields to be populated in the transaction upload. The fields selected in the Manage VC fields are displayed here.

  1. Add a new VC stratification by clicking on the ‘+’ button on the left corner to define the VC stratification.
  2. After defining the name, the VC fields (Fields selected in the Manage VC fields will appear here) to be set for criteria are selected. This will be used later on VC Rules setup to define the criteria to be populated for the fields in transaction upload.
  3. The VC Formulas created will be displayed in the Apply Formula list, that can be applied for the VC Type.

  4. The Start Date is a required field and End Date should be populated to define the validity (in terms of date) of the VC Stratification.

  5. Select the En/pable check box to make that particular VC Stratification active.
  6. Select Manage VC Rules. The Manage VC Rules panel is displayed.
  7. Add a new VC Rule by clicking on the ‘+’ button on the left corner to define the VC Rule for any VC type defined.
  8. The VC types defined in the VC Type setup are displayed in the list of this column. Select a particular VC type to define its Rule.

    The fields selected in the VC Stratification appear here, the criteria to be populated in the respective transaction upload fields in order to apply the VC are given under these columns.

  9. Select the formula to be applied for the VC Type in Apply Formula field.
  10. Enter the Apply Value column, percentage that has to be applied to the derived amount calculated by the VC Formula.

  11. The Start Date is a required field and End Date should be populated to define the validity (In terms of date) of the VC Rule.

  12. Select the Enabled check box to make that particular VC Rule active.       

After the VC Rule setup is done, it must be mapped in the VC Assignment of the POB. 

Set Up POB
  1. Select Policies > Performance Obligations.
  2. Create a new POB template.
  3. After the defining the name, description, Start date, and Revenue treatment in the POB template, navigate to VC Assignment.
  4. VC types created are displayed in VC Assignment.
  5. Enable the VC types so that the transactions collected with the VC and POB criteria are applied with the respective VC types.

VC Upload

  • VC Upload is a new functionality that is added in order to:
    • Apply VC estimate manually to an SO line without an estimated VC.
    • Make VC related changes manually to an SO line that is already applied with a VC estimate.
    • Upload actuals or adjustments to an estimated VC for an SO line.
  • This also supports a bulk update of various VC types for multiple RCs.
  • Both Estimate and Actuals upload can be done once the respective upload template is set up.

Upload Type: Estimates

In this approach, users can update an existing VC estimate or apply a new VC line to an existing transaction line.

Apply VC to an existing SO line    

Update the downloaded file and upload it using the same template through which the file was downloaded. This process is explained in detail in the following sections.

Update to an existing VC Estimate

  • Update the downloaded file and upload it using the same template through which the file was downloaded. This process is explained in detail in the following sections.
  • Validate if the SO Line exists and VC is applied for the given VC Type. If it exists, process the transaction by updating the existing estimate.

Upload Type: Actuals

  • Update the downloaded file and upload it using the same template through which the file was downloaded. The downloaded file only contains details of SO line with VC estimate applied. This process is explained in detail in the following sections.
  • Only the following columns are considered for upload. The remaining columns in the file are for additional information and are pre-populated:
    • Process Type
      • Clearing Estimate
      • Clearing Estimate Final
      • Cancel Actuals
    • Actuals (Amount)
    • Actuals (Qty)

Clearing Estimate

  • In this approach, users should provide the Process Type as Clearing Estimate. If no the template is provided, the Upload Type is selected as Actuals.
  • User can upload multiple Clearing Estimate type for the same VC line for an SO Line. This will clear the VC accrual incrementally upon each upload.

Clearing Estimate (Final)

  • In this approach, users should provide the Process Type as Clearing Estimate Final. If no the template is provided, the Upload Type is selected as Actuals.
  • This process type is needed since the system has no visibility whether to expire the remaining accrual balance on the VC Line when actuals are processed. In process type Clearing Estimate, the system doesn’t expire when partial actuals are processed. In order to differentiate the behavior, these 2 process types are needed Clearing Estimate & Clearing Estimate (Final).
  • Users can upload the Clearing Estimate (Final) type only once. Upon processing this type of VC, the system will not allow further processing of Estimate or unless a of the actual finals is done. This allows the system to expire remaining VC accrued, explained in the point above.

Cancel Actuals

  • In this approach, users need to provide the Process Type as Cancel Actuals.
  • In this type of process, cancellation of actuals is not expiring the VC. This is to reverse the actuals processed. 
  • On processing the cancellation, all the actuals or actual finals brought for the SO Line until that points in time are cancelled.
  • The actual amount brought for this type is ignored as the cancellation is absolute. The total cleared amount for that VC type is reversed.

Approach 1

Approach 1 of VC upload is described in full below:

  1. Select File Upload > Variable Consideration. The Variable Consideration dialog is displayed.
  2. Select New Template to create a new VC Upload template. The VC Upload Template dialog is displayed. In the Template Definition panel, after defining Name (Required) and Description (Optional), select an item from the Upload Type list to define whether the template has to upload Estimate or Actuals.
    • Estimate – The download of this template generates a template for Estimate upload.
    • Actuals – The download of this template generates a template for Actuals upload.
  3. Select the Enabled checkbox to make the template active.                                                                                                                                
  4. Define the fields in the File Specifications panel. Enter the File Type as CSV, Date Format used in the upload data and Start Row as 2 to upload files with headers.
  5. After defining all the necessary fields select the ‘+’ button in the left corner to create the Upload Template.
  6. Navigate to Filters to set criteria for the transactions. The VC download Template will be generated with data for a sales order line in an RC that satisfies these criteria.
  7. Select the ‘+’ button in the right corner to create a new line to define criteria for the transactions in the Filters field.
  8. Choose a condition from the Apply Criteria On list to define how the criteria can be applied. This can be Aggregated Value, All Lines, or Any Line.
  9. Choose any field from Field Name from the available fields that have been enabled for criteria.
  10. Select an Operator and define the Operand to define the condition.
  11. Enable the criteria to make the criteria active.
  12. After defining the criteria, click the Freeze button to freeze the template so that no changes can be made. Only upon freezing the template, users would be allowed to download the template or make uploads into this template.
  13. In the VC Upload dialog, select the newly added template, right-click and select Download Template.
  14.  A CSV file gets downloaded with the header and the SO line details along with the VC types based on the filter applied in the template. For a single Sales Order Line ID, there can be multiple VC Type mapping, if that VC type is mapped to the applied POB.
  15. Following are the columns that are available when downloading the template if the template type is VC Estimates. All the fields are pre-populated and contain the static data of the RC with respect to VC, such as book name, RC_ID and SO line ID along with the VC data like Price Adjustment and Transaction Price. The user should update the last two columns alone to upload the VC data.
    • Book Name
    • Organization Name
    • Revenue Contract #
    • POB Name
    • POB Template Name
    • Release Event
    • POB Satisfied
    • Sales Order #
    • Sales Order Line #
    • Sales Order Line Id
    • Sales Order Date
    • Contract Value
    • Price Adjustment
    • Transaction Price
    • VC Type
    • Orig. Estimated Amount
    • Formula Name
    • New Apply Value
  16. Following are the columns to be made available when downloading the template if the template type is VC Actuals. All the columns are pre-populated and contain the static data of the RC with respect to VC. The user should update the last three columns alone.
    • Book Name
    • Organization Name
    • Revenue Contract #
    • POB Name
    • POB Template Name
    • Release Event
    • POB Satisfied o 
    • Sales Order #
    • Sales Order Line #
    • Sales Order Line Id
    • Sales Order Date
    • Contract Value
    • Price Adjustment
    • Transaction Price
    • VC Type
    • Estimated Amount
    • Processed Actuals
    • Process Type
      • Clearing Estimate
      • Clearing Estimate (Final)
      • Cancel Actuals
    • Actuals (Amount)
    • Actuals (Qty)

The following should be done in the file before Uploading into the template:

For the Estimate Template

  1. In the download template, select the relevant VC type. The rest of the rows can be deleted.
  2. Enter Formula Name and New Apply Value.
  3. If the formula is to be given then populate the New Apply Value in % or if only the New Apply Value is to be entered, then required amount can be populated, without entering the formula.
  4. Save the file.
  5. Select the respective template, right-click and select Upload to upload the modified estimate or actuals file. After upload, a success message is displayed.

For the Actuals Template

  1. Enter the Process Type as any one of the following types for a particular line:
    • Clearing Estimate
    • Clearing Estimate (Final)
    • Cancel Actuals
  2. Under the Actuals Amount, enter the amount to be cleared.
  3. Under the Actuals Qty, enter the quantity respective of the transaction, to be cleared. Note that the Actuals Qty column can only be used if the Track by Qty field for the VC Type is checked.
  4. Either Actuals Amount or Actuals Qty can be populated, or both Actuals Amount and Actuals Qty can be populated to define the clearing amount.
  5. Select the respective template, right-click and select Upload to upload the modified Estimate or Actuals file. A success message is displayed.
  6. Save the file in the same .csv format.
  7. Select the respective template, right-click and select Upload to upload the modified estimate or actuals file. After upload, a success message is displayed.
  8. The collected Estimate or Actuals stays in the RPRO_LN_VC_EVENT as an unprocessed line.
  9. To process the data, VC process must be run in Schedule Jobs.
  10. Select Reports > Schedule Jobs.
  11. Click the Schedule Job/ Job Groups button to open the Schedule Job/Job Groups panel.
  12. The Schedule Job/Job Groups page is displayed.
  13. From the Program Name list select RevPro3.0 VC Process.
  14. Click the Program Parameters panel.
  15. The following parameters must be defined:
    • BOOK NAME value should be populated as the primary book name setup for the application for which the VC is to be applied. If there are multiple books defined, then VC process needs to be run for each book the VC needs to be applied to.
    • VC TYPE value should be populated as the VC Type that has been mentioned in the VC Upload under the VC Type Name column. In case multiple VC types are uploaded, then VC process needs to be run for each VC type required to be processed.
    • RC ID for which the VC had been uploaded. In case VC estimates are uploaded for SO lines across multiple RCs, then VC process needs to be run for RC required to be processed.Note: The data for all three parameters are available in the uploaded file.
  16. Select Submit Job to process the VC Process program.
  17. A message that the Process is submitted is displayed as a Request ID.
  18. The Status is displayed as Completed after the process is run.The corresponding VC upload line in RPRO_LN_VC_EVENT will now be processed and the PROCESSED column will be updated as ‘Y’. This processed VC will now be associated with the defined SO line and can be seen in the workbench.

Approach 2

VC Upload using Approach 2 is described below:

Under File Upload, there is a menu option for Transaction/Cost upload. The user will be able to upload VC related data with the transaction type INV-VC or CM-VC.

  • This functionality can support:
    • Application of VC estimate manually to an SO line without an estimated VC.
    • Making VC related changes manually to an SO line that is already applied with a VC estimate.
    • Uploading actuals/adjustments to an estimated VC for an SO line.
  • This also supports a bulk update of various VC types for multiple RCs.
  • Both Estimate and Actuals upload can be done.

To upload VC using Transaction Upload Template:

  1. Select File Upload > Transactions/Cost.
  2. In the Transaction Upload panel, click New Template. The New Transaction Upload Template panel is displayed.
  3. Select the newly created RC Grouping Rule.
  4. Enter a valid name for the template.
  5. In the File Specifications section, select the file type as .csv.
  6. Select the Start Row as 2. First row is the heading row.
  7. Click the + (Create) icon to create the template. 
  8. Click the Field Mapping tab.
  9. In addition to the existing default mappings, add the following fields to support upload of transaction types INV-VC/CM-VC by clicking + icon and then clicking the save icon after the mapping is done.
    • VC Type Name - VC Type name as created in VC setup has to be populated.
    • VC Formula - VC Formula should be updated with the Formula Name created during VC setup. 
    • VC Price Adjustment - If the formula is given, VC Price Adjustment column will have the percentage of the formula that is to be applied. If the formula is not given, the VC Price Adjustment can be populated as the absolute amount.
    • VC Process Type – VC Process Type details are given below in detail.
      • ESTIMATE: This process type is used to upload VC estimate manually to an SO line without an estimated VC or bring updates to an existing VC estimate.
      • CLEARING ESTIMATE: This process type is used to bring Actuals for an applied VC estimate. This will clear accrued VC for the amount uploaded.
      • CLEARING ESTIMATE (FINAL): This process type is used to bring Final Actuals for an applied VC estimate. Upon processing this type of VC, the system will not allow further processing of Estimate or Actuals unless a cancellation of the final actuals is done.
      • CANCEL ACTUALS: This process type is brought to cancel all the actuals or actual finals brought for the SO Line until that point in time. 
    • VC Qty – This field is used only for actuals upload for a VC type with Track By Qty enabled.
    • VC Comments - Users can populate comments for the VC type association.
  10. Freeze the template in order to download the template or upload data into the template.
  11. Upload the populated data file (in csv format) into the template for INV-VC/CM-VC types with the above fields populated. It is required to provide the sales order information for the SO line to which this VC should be associated.
  12. Upon uploading this data, the line will remain in staging with the NO DATA FOUND message.
  13. VC process should be run in order to bring this transaction type into the RPRO_LN_VC_EVENT table. This step is similar to Approach 1.
  14. Upon successful completion of this job, this VC data will now be processed and the PROCESSED column will be updated as ‘Y’. This processed VC will now be associated with the defined SO line and can be seen in the workbench.

The Impact of VC on the Workbench of an RC

Overview

Price Adjustment
  • When an RC has VC associated either through VC upload (Manual) or through Automatic application of VC, the Price adjustment that is calculated by the respective VC formula. The respective VC formula is displayed under the Price Adjustment header in the Overview page of the RC.
  • For every adjustment (Increase or Decrease) through estimate or actuals by VC upload, the Price adjustment will change, which will likewise reflect in the Price Adjustment header.

Transaction Price

The Transaction Price is equal to the price adjusted amount of the revenue contract value.

Revenue To Date

The Revenue To Date will be calculated as equal to the sum of Revenue, Allocations, and the VC Revenue scheduled in the current period.

Transactions

Details like the respective VC applied and the Price Adjustment calculated for each individual transaction can be viewed under the Line Details present in the Transactions screen of the RC Workbench.

The Line Details contains the below subtabs which can be used to view the VC related information for each individual transaction (line):

  • Transaction Pricing
  • VC Actions
Transaction Pricing

The Transaction Pricing tab displays the Price Adjustment details along with the Estimated and Cleared amount along with the VC type details as per the VC setup.

VC Actions

VC Actions tab tracks the released, adjusted, or cleared amount through VC Actions (Estimate or Actuals) for each transaction.

For the VC account to appear in RC waterfall tab, the appropriate waterfall type needs to be defined for the account.

In Revenue summary, the accrued VC amount will show as VC Liability amount until it is cleared (actuals are brought in). 

VC Accounting

All the examples below are given for VC down case where SO line is fully invoiced.

Clearing Estimate (Actuals)

VC Accounting Actual Scenarios.xlsx

Cancel Actuals

Cancellation of actuals is always absolute. The total actuals and actual finals processed before the cancellation are fully cancelled.

VC Accounting Cancel Actual Scenarios.xlsx

 

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