Revenue recognition methods—AR or Order Entry

A revenue recognition method determines how revenue is allocated during the recognition term. The following table lists the methods supported by Intacct.

Method	Description
Straight line	Revenue is allocated evenly over the recognition term. There are no partial period allocations with this method.
Straight line, prorate exact days	Full period revenue is allocated evenly over the recognition term. Partial period revenue is allocated based on a daily revenue rate multiplied by the exact number of days in each period. This method is only applicable when Recognition Term = Contract Term.
Straight line, percent allocation	Full period revenue is allocated evenly over the recognition term. Partial period revenue is allocated as a percentage of total days in those periods.
Straight line, percent allocation, end of period	Full period revenue is allocated evenly over the recognition term. Partial period revenue is allocated as a percentage of the total days in those periods. The last period is considered a full period. This method is only applicable when Recognition Term = Fixed Period.
Exact days per period, prorate days	Both full and partial period revenue are allocated based on a daily revenue rate multiplied by the exact number of days in each period.
Exact days per period, prorate days, end of period	Both full and partial period revenue are allocated based on a daily revenue rate multiplied by the exact number of days in each period. The last period is considered a full period. This method is only applicable when Recognition Term = Fixed Period.
Percent completed	Revenue is recognized based on a project’s percentage of completion.
Milestone	Revenue is recognized based on project milestones.
Custom	Revenue is recognized based on user-defined periods. The last period is considered a full period.

Straight line and Exact days per period examples

Let's say we have a transaction line item for an amount of 6,000.00. The recognition schedule period is monthly and posts on the last day of the month. The recognition schedule starts on Mar 27 and ends on Jun 15 in the same year.

The number of days in each recognition period is as follows:

	Mar 27 - Mar 31	Apr 1 - Apr 30	May 1 - May 31	Jun 1 - Jun 15	Total days
Number of recognition days	5	30	31	15	81

The following table shows a comparison of calculations made using different revenue recognition methods.

Method	Mar 31	Apr 30	May 31	Jun 30	Calculation
Straight line	1,500.00	1,500.00	1,500.00	1,500.00	6,000.00 / 4 = 1,500.00
Straight line percent allocation	500.00	2,000.00	2,000.00	1,500.00	Partial periods: 5 + 15 = 20, 5 = 25% of 20, 15 = 75% of 20 Full periods: 6,000.00 / 3 = 2,000.00 2,000.00: 25% = 500.00, 75% = 1,500.00
Straight line, prorate exact days	370.35	2,259.30	2,259.30	1,111.05	6,000.00 / 81 days = 74.07 74.07 x 5 = 370.35 74.07 x 15 = 1,111.05 370.35 + 1,111.05 = 1,481.40 (6,000.00 - 1,481.40) / 2 full periods = 2,259.30
Exact days per period, prorate days	370.37	2,222.22	2,296.30	1,111.11	6,000.00 / 81 days = 74.07 74.07 x number of days in each period Example: 74.07 x 5 = 370.37, 74.07 x 30 = 2,222.22, and so on.

Percent completed example

You can base project revenue recognition on either a system-calculated percentage of budgeted costs or timesheet hours or on a user-determined percentage of completion for a project or task. Revenue recognition can be scheduled to occur as work progresses on a project (at whatever percentage of completion exists for the specified recognition period) or it can be scheduled to only occur when certain completion percentage thresholds are met.

This example describes the Observed percent complete process with recognition occurring as specified threshold levels are met.

As the project or task progresses, a user, usually the project manager, enters the desired percentage value in the Observed percent completed table with an associated As of date on the applicable project or task.

If the percentage of completeness entered meets a threshold established on the revenue recognition template, Intacct schedules the applicable portion of revenue to be posted on the percent complete As of date.

Say you have a sales transaction line item for a three-month project starting January 1 for a transaction amount of 10,000.00 and you want to recognize revenue at the project level. The revenue recognition template is set to recognize 25% of the project revenue at thresholds when the project is 25%, 50%, 75%, and 100% complete as follows:

On January 31, you evaluate the project's progress and believe the project is 30% completed. You enter 30 in the Observed percent completed table on the project as of January 31. According to the revenue recognition template, 25% of the revenue can be recognized. The revenue recognition schedule shows 2,500.00 scheduled to post on January 31.

25% * 10,000.00 = 2,500.00

On February 28, you evaluate the project's progress and believe the project is 80% completed. You enter 80 in the Observed percent completed table on the project as of February 28. According to the revenue recognition template, an additional 50% of the revenue can be recognized. The revenue recognition schedule shows 5,000.00 scheduled to post on February 28.

(25% * 10,000.00 = 2,500.00) + (25% * 10,000.00 = 2,500.00) = 5,000.00

Learn more about project revenue recognition templates.

Custom template example

Let's say you’re creating a custom revenue recognition template with the following settings:

• Recognition schedule period = Monthly
• Posting day = End of period
• Recognition term = Contract term

In the Entries section, map the period for recognition to occur with the percentage of the amount to recognize that period, as in the following example:

In this example, 0 in the Period offset indicates the first period of recognition would be scheduled for the month in which the recognition start date occurs. The second recognition period would be four months from the recognition start date, and the third recognition period would be eight months from the recognition start date.

Say you created a transaction line item for services with a revenue start date of March 1 for a transaction amount of 5,000.00. Using the revenue recognition template defined above, the recognition schedule would be as follows:

Scheduled posting date	Amount
March 31	1,500
July 31	1,500
November 30	2,000