Enhanced interface

Recognition methods—Contracts

The following table describes the recognition methods available in Contracts. It also shows how revenue schedules for a contract line on a one-year contract may differ according to the recognition method when the Flat/Fixed amount field on a contract line is 12,000.00.

Recognition method	Description
Daily rate	Revenue is allocated using a daily recognition rate. (total schedule amount / number of days in recognition term) * (number of days in month) See an example of a daily rate revenue schedule
Predefined percentages	Revenue is allocated based on a table of entries that map the period to recognize with the percentage of the flat/fixed amount to be recognized that period. This revenue schedule is completely customized by the user. See an example of a predefined percentages revenue schedule
Quantity-based	The revenue schedule will be blank until a usage record is associated with the contract line. This type of revenue recognition is proportionate to the quantity used, so the system doesn't know what the schedule will be until the usage quantity is input. The system calculates quantity-based revenue recognition as follows: (total contracted quantity / recorded usage) * flat/fixed amount See an example of a quantity-based revenue schedule Learn more about Quantity-based revenue recognition.
Project percent complete Task percent complete	There are many different variations of percentage of completion revenue templates. For example: The template could be based on the project as a whole or on an individual task The percentage of completion can be automatically calculated by the system based on approved hours / source hours, or it can be determined by user input The template can have recognition thresholds set so that project/task revenue is only recognized when certain thresholds are met A revenue schedule based on a percentage of completion template will be blank until Update percent complete schedules is executed against an applicable As of date in the Manage Revenue and Expense Recognition page. Learn more about percentage of completion in project-based revenue. In order to use a Project percent complete or Task percent complete method, the Track time by setting must be either "Project and task" or "Customer, project, and task" in the Configure Projects page. See an example of a percentage of completion revenue schedule
Straight line	Revenue is allocated evenly over the recognition term. The calculation varies according to whether partial periods exist and where a partial period occurs. When there are no partial periods in the recognition term, the calculation is: total schedule amount / number of recognition periods= periodic amount See an example of a straight line schedule with no partial periods: When there are partial periods in the first and last period, the calculation is: total schedule amount / number of recognition periods= periodic amount (periodic amount / number of days in the partial periods = daily allocation rate number of days in partial period * daily allocation rate = amount of partial period See an example of a straight line schedules with first and last partial periods: When the revenue start date is the last day of the month and the last period is a whole period, the calculation is: total schedule amount / number of recognition periods= periodic amount (periodic amount / number of days in the partial periods = daily allocation rate number of days in partial period * daily allocation rate = amount of partial period (total schedule amount - amount of partial period) / number of recognition periods = periodic amount for whole periods See an example of a straight line schedule where the revenue start date is the last day of the month: When: the first period is a partial period and the last period is a whole period, the first period is a whole period and the last period is a partial period, or both first and last periods are partial periods, but combined do not equal a whole period, the calculation is: total schedule amount / total number of days in the recognition term = daily allocation rate number of days in the partial periods * daily allocation rate = amount of partial periods (total schedule amount - amount of partial periods) / number of whole recognition periods = amount of full periods See an example of a straight line schedule where the first period is a partial period: