ASC 606 breaks down the revenue recognition process into five basic steps:
- Group transaction lines into revenue contracts.
- Identify the performance obligations in the revenue contract.
- Determine the transaction price.
- Allocate the transaction price.
- Recognize the revenue as performance obligations are satisfied.
For Zuora Revenue to automatically performs these steps to recognize the revenue, you must analyze your company's accounting policies and then configure Zuora Revenue properly to suit your business needs.
Basic policy-related configuration
The following policy related configuration is the minimum requirement for Zuora Revenue to perform the ASC 606 steps properly:
- RC grouping templates
The RC grouping templates determine how Zuora Revenue should group the incoming transaction lines into revenue contracts as required by ASC 606 Step 1.
For information, see Create RC grouping template.
- POB templates and POB assignment rules
The POB templates and assignment rules determine how Zuora Revenue identifies performance obligations within each revenue contract as required by ASC 606 Step 2 and also define the revenue treatment for each performance obligation.
For information, see Performance obligation processing.
The SSP setup determines how the transaction price is determined and allocated for each line in the revenue contract as required by ASC 606 Step 3 and 4.
For information, see SSP setup.
After these basic configurations, Zuora Revenue can perform revenue management based on the revenue events that are uploaded.
Advanced policy-related configuration
Zuora Revenue also provides configurable rules and settings for you to tailor Zuora Revenue to your own revenue management policies, such as:
- Contract modification (See Contract modifications)
- Cost (See Cost processing)
- Variable consideration (See Variable consideration processing)
- POB releasing based on events (See Event processing)
- Revenue holds and transfer holds (See Revenue holds and transfer holds)
- Approval rules (See Set up approval rules)
- Revenue release based on MJE (See Manual journal entries)