The Revenue Management Engine automates the timing of revenue recognition for manually entered invoices, or invoices imported via AutoInvoice. If you use event-based revenue management, then Receivables evaluates these invoices and decides whether to immediately recognize revenue, or temporarily defer revenue to an unearned revenue account.  Revenue is subsequently recognized depending on certain events, such as customer acceptance or receipt of payment.

Receivables makes these automatic revenue recognition or deferral decisions based on your organization's established revenue policy, and the existence of any revenue contingencies on the invoice line.

Revenue contingencies are terms and conditions in a sales contract or order that prevent revenue from being immediately recognized, based on strict revenue recognition requirements mandated by US GAAP and International Accounting Standards. Typical contingencies that can delay revenue recognition are fiscal funding clauses (for
government contracts), cancellation clauses, customer acceptance clauses, customer creditworthiness, nonstandard payment terms, and nonstandard refund policies. The extent of the revenue deferral, and subsequent timing of revenue recognition, depends on the revenue contingency. Each contingency has its own related contingency removal event:
• For example, if the customer is not creditworthy, then you can recognize revenue on that customer's invoice only in the amount of any payments received.
• Or, if the customer was offered a nonstandard refund policy on an order, then you can recognize revenue on that customer's invoice only after the refund policy has expired.

The automated process occurs as follows:

1. Receivables evaluates an invoice when manually entered or imported. When first evaluating an invoice for revenue recognition or deferral, Receivables checks transaction lines to determine if any revenue contingencies exist. Contingencies are defaulted to invoices when imported from a feeder system or entered manually in the Transactions workbench. Receivables defaults contingencies if the enterprise revenue policy has been violated, or if certain conditions on the related sales order or contract exist.

If revenue must be deferred, then the Revenue Management Engine does so and records the reason for the deferral.

2. Receivables then waits for an event that can remove the contingency and trigger revenue recognition. The Revenue Contingency Analyzer monitors contingencies until they expire or are removed. When such an event occurs, the Revenue Contingency Analyzer can automatically recognize the appropriate amount of unearned revenue on the invoice.

Specifically, revenue is scheduled according to the initially assigned accounting rules and rule start dates. For invoice lines without accounting rules, the revenue date is set to the latest contingency removal date.

This automated revenue management process helps you to comply with the strict revenue recognition requirements mandated by US GAAP and International Accounting Standards.

Even if you enable this automated revenue recognition process, you can always use the Revenue Accounting Management (RAM) wizard to manually adjust revenue and Modifying Invoices Under Collectibility Analysis. However, once you manually adjust revenue, Receivables discontinues the automatic monitoring of contingencies.

Prerequisites
• Select the Require Salesperson system option in the Miscellaneous tabbed region in the System Options window.

• (Optional) In the Revenue Policy page, populate one of the following fields:

•      Payment Term Threshold
•      Standard Refund Policy
•      Credit Classifications region

• (Optional) Transfer contingency information to Receivables by assigning revenue contingency IDs to billing lines, before invoice import by AutoInvoice or invoice creation by the Invoice API.
Note: When importing parent and child invoice lines from Oracle
Order Management, AutoInvoice automatically copies any contingencies from the parent line to the child line. An example of a parent and child is a purchased item and its related services, such as an extended warranty.

• (Optional) Define your own revenue contingencies, along with corresponding contingency removal events.

• (Optional) Define contingency defaulting rules to automatically assign a contingency to an invoice.
Note: You cannot use this functionality with Oracle Projects invoices, because revenue from Projects is recorded directly in the general ledger, not in Receivables.