# Enhanced CA/CL netting process

Zuora Billing - RevPro Integration is in Limited Availability

In Zuora Billing and RevPro integration scenarios, both regular and discount charges are collected by RevPro as separate sales order (SO) lines in a revenue contract (RC), which might result in the incorrect determination of the contract asset or contract liability (CA/CL) position during the normal CA/CL netting process. For example, a large negative value on a discount charge line might put the whole RC in the CA position, which is expected to be the CL position.

To correctly determine the CA/CL position for a revenue contract, the CA/CL netting process is enhanced to better handle the charge line with negative values in a revenue contract.

This article explains only the enhancement to the normal netting process in RevPro. Compared with the normal CA/CL netting process, the major change in the enhanced netting process is how to determine the CA/CL position for the whole RC. As for creating netting entries either at the transaction line level or at the application level, this is the same as the normal CA/CL netting process.

For information about the common usage of the netting functionality in RevPro, see Netting process.

## Determine CA/CL position

The enhanced CA/CL netting process starts with checking the billed amount and revenue recognized to date for each line in the whole RC. Based on whether there is a negative value in the RC, different steps are performed as follows:

• If all the line-level billed amount and revenue recognized to date are positive values in the whole RC, RevPro performs the following steps to determine the CA/CL position for the RC:
1. Calculate the actual CA/CL balance at the RC level based on the following formula:

Actual CA/CL Balance = Total Billed Amount - Total Revenue to Date

2. Use the actual CA/CL balance at the RC level to determine the CA/CL position for the whole RC. If the balance is positive, the RC is in the CL position; otherwise, it is in the CA position.
• If any of the line-level billed amount and revenue recognized to date is negative, RevPro performs the following steps to determine the CA/CL position for the RC:
1. Consider the line-level negative billed amount and/or revenue recognized to date as positive values.
2. Calculate the line-level CA/CL balance based on all positive values. This value is indicated by the CA/CL Determination Amount column in the UI.

CA/CL Determination Amount = Positive Billed Amount - Positive Revenue to Date

CA/CL Determination Amount is used only to determine the CA/CL position for the RC in the next step. It does not reflect the actual balance.
3. Calculate the RC-level CA/CL Determination Amount by summing up the line-level values.
4. Use the RC level CA/CL Determination Amount to determine the CA/CL position for the whole RC.

After the CA/CL position is determined for the whole RC, the actual CA/CL balance will be used to create netting entries for each line if necessary. The CA/CL Determination Amount column is available in the RC Rollforward Report to help you understand the decision points.

## Netting examples

Several examples are provided to help you understand how to determine the CA/CL position during the enhanced CA/CL netting process. In the following examples, there are three charge lines in the revenue contract. The current open period is Apr-2019.

### Example 1

In this example, the C-00004 charge line has been completely billed and the other two lines have been billed for 4 months until April 2019.

The line-level negative values are considered as positive values to calculate the line-level CA/CL Determination Amount. The sum of the line-level CA/CL Determination Amount values is 973.3333334 so the RC is in CL position.

Charge # Billed Amount Revenue To Date Billed Amount (all positive values) Revenue To Date (all positive values) CA/CL Determination Amount CA/CL Position
C-00001 400 73.3333333 400 73.3333333 326.6666667
C-00002 266.6666667 306.6666667 266.6666667 306.6666667 -40
C-00004 -1000 -313.3333333 1000 313.3333333 686.6666667
1666.666667 693.3333333 973.3333334 CL

After the CA/CL position is determined for the whole RC, the actual CA/CL balance will be used to create netting entries if necessary.

### Example 2

In this example, all three lines have been billed and recognized for 4 months.

The line-level negative values are considered as positive values to calculate the line-level CA/CL Determination Amount. The sum of the line-level CA/CL Determination Amount values is 16.6666667 so the RC is in CL position.

Charge # Billed Amount Revenue To Date Billed Amount (all positive values) Revenue To Date (all positive values) CA/CL Determination Amount CA/CL Position
C-00001 666.6666667 655 666.6666667 655 11.6666667
C-00002 133.3333333 141.6666667 133.3333333 141.6666667 -8.3333333
C-00004 -1000 -986.6666667 1000 986.6666667 13.3333333
1800 178.333333 16.6666667 CL

After the CA/CL position is determined for the whole RC, the actual CA/CL balance will be used to create netting entries if necessary.