demo script - my011073.sapbydesign.com · complementary demo revenue accounting contracts (ifrs15/...

Complementary Demo Revenue Accounting Contracts (IFRS15/ ASC606)

SAP Business ByDesign Reference Systems

Demo Script

Revenue Accounting Contracts (IFRS15/ ASC606)

Classification: Internal and for Partners

Version: 20181017


Document Version: 20181017 2

Disclaimer

This demo script is based on the ByD Reference System for the Almika model company. There are several country versions

of the Almika ByD implementation. The content is similar but deviates especially with respect to language support, demo

support, names and object descriptions. Sample data used in this demo script relate to the US country version – for other

country versions different data samples might be relevant.

A prerequisite for being able to fully understand this demo script and run the demo, is a sound system knowledge on SAP

Business ByDesign. General assumption is that you are familiar with the Learning Center content available in your ByD

system at: Home Self-Services – Learning Center.

Although the script has been tested carefully you might nevertheless encounter different system behavior when running a

demo in an actual Almika demo tenant.

Release Statement

This version of the demo script is released for the following country version of the ByD Reference System for the Almika

model company:

• US – United States, as of demo release ByD 1811

The demo is not available for other country versions or earlier demo releases. The demo release basically is determined by

the time when the demo tenant has been provided for demo usage, a demo tenant provided between mid of December 2018

and mid of March 2019 is part of the demo release ByD 1811.

As of demo release ByD 1802 the demo release of your ByD demo tenant can be identified in the Company-Specific-Help:

You can find a help entry “ByD <nnnn> Demo Guides <CC>” under Help – Company-Specific-Help. <nnnn> specifies the

demo release of your ByD demo tenant, e.g. ‘1811’ – released in November 2018. <CC> specifies the country version of your

demo tenant, e.g. ‘US’ – Almika US country version. The version-controlled demo guides provided in this help entry match to

the demo release and the country version of your ByD demo tenant. Please be aware that the demo guides are typically not

specific to the country version, but the version of the demo guide is specific to your ByD demo tenant.



Table of Content

1 Demo Script Overview ................................................................................................................................... 4

1.1 Demo Overview ...................................................................................................................................... 4

1.2 Intended Audience.................................................................................................................................. 4

1.3 Protagonists ........................................................................................................................................... 4

1.4 Business Pain Points .............................................................................................................................. 4

1.5 Key Messages and Value Proposition ..................................................................................................... 5

1.6 Story Flow Summary .............................................................................................................................. 6

2 Technical Requirements ................................................................................................................................ 7

2.1 System Access Information ..................................................................................................................... 7

2.2 User Accounts ........................................................................................................................................ 7

2.3 Companies and Set of Books .................................................................................................................. 7

Demo Selling a Product with Service Under IFRS 15 ........................................................................................... 8

2.4 Create Sales Order ................................................................................................................................. 8

2.5 Deliver Product ....................................................................................................................................... 9

2.6 Understand Transactions in Accounting................................................................................................... 9

2.7 Execute Service and Invoice the Sales Order ........................................................................................ 11

2.8 Repeat Revenue Recognition Run ........................................................................................................ 12



1 Demo Script Overview

1.1 Demo Overview

This demo script outlines the base parts of IFRS 15 / ASC 606 capabilities of SAP Business ByDesign Accounting. It shows

you how to introduce an audience into the functionality and how to answers questions referring to accounting standard’s

concepts like “contracts”, “performance allocation” and the “allocation of the transaction price”.

The accounting standards ASC 606 (issued by FASB, valid for the US), IFRS 15 (issued by IASB, equivalent to ASC 606)

and local adoptions of IFRS 15 (issued by local governments) get validity from 2018 for IFRS applicants, and from 2019 for

most US-based companies. In this document, references to IFRS 15 apply also to ASC 606 regulations, or their local

adoptions.

In this demo, the company Almika Inc. provides a temporary sales offering, comprising a heating unit plus a discounted

installation service. According to IFRS 15, this forms one contract, two performance obligations (one for the product and

another one for the service) and requires allocating the expected revenue (referred to in the standard as “transaction price”)

amongst these performance obligations.

The audience will see the effects of the accounting standards after delivery of the product in a first step, and the effects

having delivered the service and issued the customer invoice subsequently. The demo will also give an overview over

analytical reports and introduce the new business object Revenue Accounting Standard.

1.2 Intended Audience

SAP internal and SAP Partners: Pre-Sales Executives, Pre-Sales Solution Advisors

SAP external: CEO, CIO, Accountants

1.3 Protagonists

The main characters of this demo are:

Iris Green is accountant, responsible for revenue and cost. She is a frequent user of analytics and tools provided for

costing and revenue accounting, like the revenue recognition feature.

Sales representative Kate Jacobs advices customers in products and services and enters customer requirements as

sales orders into the system.

Luther Loblanski is warehouse manager. He manages the warehouse team, but still executes delivery requests, packs

and ships parcels.

1.4 Business Pain Points

The business pain points addressed are:

Compliance to accounting standard ASC 606 and IFRS 15 or local adoptions of IFRS 15.

Application of the process model proposed by the accounting standard: Identification of a contract, identification of a

performance application, determination of the standalone selling price, allocation of the transaction price and realizing

the revenue.

Accounting for IFRS 15, calculation of contract liabilities and contract assets.

Reporting on “contracts”, “contract liabilities”, “contract assets” and the realization of revenue.



1.5 Key Messages and Value Proposition

Overview

The accounting department provides reliable financial reports, key figures and compliant presentation of figures, compliant to

local or international accounting standards. The accounting standard IFRS 15 (ASC 606 in the US) has changed with respect

to on how to account for revenue from contracts with customers. SAP Business ByDesign helps to comply with this standard

in an easy and intuitive way, by adopting the five-step model proposed in this standard.

1. The step of the identification of a contract is executed when Sales Orders or Customer Contracts are being entered into

the system. A sales agent can group them by assigning them to a single Revenue Accounting Contract.

2. Performance obligations can be identified directly when entering items for Sales Orders or Customer Contracts.

3. The standalone selling price is, by default, a customer list price, but can be changed by an accountant in a later step of

the process.

4. Revenue (in the standard, referred to as “transaction price”), is allocated using the standalone selling price by executing

a revenue recognition run.

5. Revenue is being realized at defined events for the delivery of products or services, by a given percentage of

completion, over time or by figures given manually or via add-on.

SAP Business ByDesign helps the accountant to comply with IFRS 15 or ASC 606. It provides means and analytical reports

to provide accurate figures throughout the year and to explain the results to an auditor at fiscal year-end.

Key Features and Associated Benefits

Application of the five-step model applied from order entry to fulfillment.

Revenue accounting contract in sales

o A sales agent can group sales orders and customer contracts to one contract in the meaning of the accounting

standard, by assigning them to the same revenue accounting contract.

o Sales order items and customer contract items can be identified as performance obligations.

Revenue accounting contract in finance

o The standalone selling price can be entered manually.

o Performance allocations can be taken out from revenue allocation.

o Analytical reports for revenue accounting contracts and performance obligations can be accessed.

Revenue recognition run realizes revenue, based on defined events, progresses or manual entries.

o Calculation of contract asset and contract liability.

o Realization of revenue, based on satisfaction of performance obligation.



1.6 Story Flow Summary

The demo scenario covers these parts:

1- Identification of a contract and performance obligations, according the accounting standards, in CRM

The sales agent enters a sales order with two items, a heating unit and an installation service. By assigning the

sales order to a revenue accounting contract, the agent identifies “the contract” according to IFRS 15, while each

sales order item forms one performance obligation that is to be executed and measured towards satisfaction

individually.

2- Partial-delivery of the product and accounting

The heating unit gets delivered. This allows to identify effects on accounting and to explain the revenue accounting

contract in Financials.

3- Completion of the contract by performance of the service and invoicing

By execution of the service, the “contract” is fully satisfied. After invoicing, the financial figures get reviewed again.

A full demo of these three steps helps to understand the principles of how SAP Business ByDesign has adopted the IFRS 15

accounting standard, using these base principles:

Identification of the contract and performance obligation is with the sales agent, at entry of a sales order or customer

contract.

The standalone selling price is the regular list price a customer would expect.

Manual changes of the revenue accounting contract in Finance.

Calculation of contract assets, unbilled receivables and contract liabilities is done for a whole contract.

Methods to realize revenue for event-based processes, such as the delivery of a product and the execution of a one-

time service.



2 Technical Requirements

2.1 System Access Information

To work through the demo, you need access to a ByDesign demo tenant for the global model company Almika Inc.. The

demo is supported as of ByDesign Demo Release 1811. The appropriate Almika company fact sheet is available as

‘Company Specific Help’ content in the ByDesign Almika demo tenant.

2.2 User Accounts

The following user accounts for the ByDesign Almika implementation are to be used to work through the demo:

Predefined User ID User Name (US) Password1 Role

Financial02 Iris Green Welcome1 Financial Accountant

Warehouse01P Luther Loblanski Welcome1 Warehouse Manager

Sales02P Kate Jacob Welcome1 Sales Representative

2.3 Companies and Set of Books

In a US tenant, Revenue Accounting Contracts have been switched on for these entities:

Company Set of Books

1000 – Almika 9011 – US GAAP

1 The passwords given in the table refer to the delivery status of the ByD Almika demo tenant. The passwords may have been changed for an actual demo tenant.



Demo Selling a Product with Service Under IFRS 15

The focus of this demo scenario is on the means to provide compliance with accounting standard IFRS 15, ASC 606 or a

local equivalent. The audience will learn how to apply the 5-step-model outlined in the accounting standard.

Almika has a temporary special offer for its customers: They sell a package of a heating unit plus its installation for half the

price. Interpreting IFRS 15, Iris Green, the accountant assesses that this requires her to:

• Account for the product delivery and service performance as one contract.

• The product delivery and service execution form separate performance obligations, but it is required to allocate revenue

across these performance obligations, using their list price as standalone selling price.

• Revenue is to be realized after delivery of the heating unit and after the execution of the service.

The demo covers the following steps:

1. Entry of a sales order with identification of a revenue accounting contract (i.e. the “contract” in the terms of the

accounting standard) and performance obligations.

2. Delivery of the product.

3. Review of the revenue accounting contract in Financials, review of reports. Execution of the revenue recognition run.

4. Delivery of the service, issue of a customer invoice for the whole sales order.

5. Execution of the revenue recognition run, review of figures in accounting.

2.4 Create Sales Order

What to Say

Customer Silverstar wants to take advantage of the special offer to get a heating unit including installation for half of the

price. They call their sales responsible Kate Jacob, who enters the sales order into the system. As the customer has already

ordered the package before, Kate will simply copy the earlier order (this also simplifies the demo steps).

The sales order has two items: one for the product, the other one for the service. In this case, the “contract” (in terms of

IFRS15 / ASC 606 accounting standard) comprises of such sales order. The two items form separate performance

obligations.

In this case, the sales agent does not have to care for the right assignment to a revenue accounting contract or performance

obligations. By default, the system will assign a new sales order to a new revenue accounting contract, and a new item to a

new performance obligation. But in general, it is possible to assign several sales orders to the same revenue accounting

contract, and to assign several items to one performance obligation.

What to Do

Create Sales Order

Logon to your SAP Business ByDesign system with the user account Sales02P (sales responsible)

Open the work-center view Sales Orders Sales Orders

Filter for the earlier Sales Order 3342. Select it and click Copy.

A new Sales Order opens. At first, click Save. This will give you a Sales Order ID. Take a note of it.

Clear the field Revenue Accounting Contract ID and hit return. Click New to create a new Revenue Accounting

Contract. Take a note of it.

Enter a meaningful description, copy it to the Revenue Accounting Contract description as well.

Check that the Requested Date equals today's date.

Release the Sales Order.



Log-off from the ByD system.

2.5 Deliver Product

What to Say

The warehouse ships the heating unit to customer Silverstar. This fulfills the first performance obligation.

What to Do

Post Goods Issue

Logon to your ByDesign system with the user account Warehouse01P (warehouse manager).

Open the work-center view Outbound Logistics Delivery Proposals.

Change the filter to All Orders by Selection. In the search field, enter the Sales Order ID you noted in the previous

step. Hit enter.

Only in case the Sales Order does not appear here:

o Go to work-center view Outbound Logistics Control Customer Demand.

Change the filter to All Orders by Selection.

o Search for the Sales Order, select it.

o If release status is Not Released, hit button Release.

o Go back to the first step of this chapter.

Select the sales order and click on Post Goods Issue.

Log off.

2.6 Understand Transactions in Accounting

What to Say

So far, we have been in sales and logistics, to enter and fulfil the customer’s requirement. We will now take the perspective

of an accountant and check the revenue accounting contract, to understand how the expected revenue for the contract is

being allocated amongst performance obligations.

At first, we will see when revenue will be realized for both items. We will find that accrual method Realize at point of delivery

has been assigned. This means, that having delivered the product, the system will realize the allocated amount to this item.

At the Revenue Accounting Contract, you can see the Transaction Value of each line item. The total of this will be allocated

to performance obligations and assigned sales document items using the standalone selling price, which can be entered also

manually. Here, the system has taken the regular price, derived from price lists, as a standalone selling price.

In the reporting section, you will see the main key figures for a contract under IFRS 15: Realized revenue, unbilled

receivables, contract assets and contract liabilities. Having executed a revenue recognition run, which will determine that the

product has been delivered and hence realize the allocated amount of this position, these figures will change.

What to Do

Check Revenue Accounting Contract

Logon to your ByDesign system with the user account Financial02 (accountant).

Open the work-center view Cost and Revenue Sales Documents.



Search for the Sales Document ID, i.e. for the noted Sales Order ID.

For each of the two items that will appear, in the Details section, change to tab Accounting Data. For both items,

accrual method Recognize at point of delivery is assigned.

Scroll down to column Revenue Accounting Contract. Click on it to open the Revenue Accounting Contract.

Hint: After the Sales Order has been released it may take several minutes for the Revenue Accounting

Contract to appear here. If the column does not show a Revenue Accounting Contract ID, refresh the list.

Note down the Revenue Accounting Contract ID, as it is needed in the next demo step.

Review the Revenue Accounting Contract: Expand the performance obligations to see the sales document items

assigned. Compare the financial figures, like Standalone Selling Price or Allocated Amount.

Background: While the heater Combi 190s hasn’t been discounted, there was a discount given for the

installation. Hence, the transaction price for the contract, which is the total of the expected collectable amount of

both items, is to be calculated at first (1,227 USD + (4 x 120 USD) = 1,707 USD), then to be allocated back to the

single items, using the standalone selling price.

Performance

Obligation

Transaction Price

(TP)

Standalone Selling Price

(SSP)

Allocated Amount

(TP x SSP / ∑ SSP)

Combi 190s 1227 USD 1227 USD 1467 USD x 1227 USD / 1707 USD

= 1054,49 USD

Installation 4x 120 USD x 50%

= 240 USD

4x 120 USD

= 480 USD

1467 USD x 480 USD / 1707 USD

= 412,51 USD

Total 1467 USD 1707 USD 1467 USD

The standalone selling price is being derived from the list price which is initially proposed in the sales order, but a

deviating one can be entered at this screen, when going to the tab Manual Changes.

Close it.

Show reporting

Go to work-center view Cost and Revenue Reports List. Open report Revenue Accounting Contract List - Key

Figure Overview.

In the selection area, enter the associated Revenue Accounting Contract ID and click on Apply.

In the analysis pattern, click on the Revenue Accounting Contract ID. A small arrow will appear. Click on Navigate to

Revenue Accounting Contract to show an alternative way to get to the Revenue Accounting Contract.

Keep the reports open. You will see that the key figures for line item 10 will change.

Execute Revenue Recognition Run

Go to work-center view Cost and Revenue Periodic Tasks Revenue Recognition.

Click on New.

In the definition screen of the Revenue Recognition Run, enter these values:

Description Order <Sales Order ID> after product delivery

Test Run Not checked.



Company 1000

Set of Books -Empty-

Period/Year e.g. ‘008.2018’ for August 2018.

Sales Document Type Sales Order

Sales Document ID <Sales Order ID>

Click on Start Now.

Wait until the run completes. When button Display Log gets available, click on it.

Select the line of Set of Books US GAAP and click on View.

Check tab Postings.

Check tab Processed Successfully.

Open the tab, open sub-tabs Advanced Information, Event Based. Click on Click here to execute the query. You will

see the calculation results of the revenue recognition run.

Close it.

Check effect of the Revenue Recognition Run in reporting

Go back to report Revenue Accounting Contract List - Key Figure Overview. Refresh it.

If this report is no longer open, open it again by executing these steps:

o Go to work-center view Cost and Revenue Reports List. Open report Revenue Accounting Contract

List - Key Figure Overview.

o In the selection area, enter the associated Revenue Accounting Contract ID and click on Apply.

Check the effect of the Revenue Recognition Run in columns Revenue, Contract Liability, Contract Asset.

Background: At this point in time, Almika has delivered the heating unit. This satisfies the first performance

obligation. Hence, it is allowed to realize the allocated amount of 1,054.49 USD, while the amount of 1,227 USD, the

agreed price for the first line of the sales order, can now be invoiced to the customer. The difference, 172,51 USD,

shall be shown as a contract liability – a liability the company has towards its customer that will disappear once the

service has been delivered.

Log off from the system.

2.7 Execute Service and Invoice the Sales Order

What to Say

Some days later, the service gets executed and the sales agent confirms it. Remembering the assigned accrual method, we

are expecting the revenue recognition to realize the allocated amount with its next run.

As a next step, we invoice the order. This action could also have been triggered automatically by a periodical run.

What to Do

Confirm service execution

Logon to your ByDesign system with the user account Sales02P (sales representative).



Open the work-center view Sales Orders Sales Orders.

Filter for the Sales Order. Select it, click Edit.

Click on Submit Complete Service Execution.

Close the Sales Order.

Create a Customer Invoice

Open the work-center view Customer Invoicing Invoice Requests.

In the search field, enter the Sales Order ID. Executing the search, two lines will appear: for the product delivery and

the service execution.

Hold down the shift key to select both lines. Click on Invoice.

Click on Release as Invoice.

2.8 Repeat Revenue Recognition Run

What to Say

Repeating the revenue recognition, we will see that amounts posted as unbilled receivable, contract asset or contract liability

will disappear: the whole contract has been delivered and invoiced, this means it is fulfilled. Revenue gets realized fully.

What to Do

Check analytical reports

Logon to your ByDesign system with the user account Financial02 (accountant).

Go to work-center view Cost and Revenue Reports List. Open report Revenue Accounting Contract List - Key

Figure Overview.

In the selection area, enter the associated Revenue Accounting Contract ID and click on Apply.

Deferred revenue will appear. In this case, when using revenue accounting contract, the account is only used

for technical reasons as an interim account and will be cleared to zero after the revenue recognition run.

Keep the report open.

Execute Revenue Recognition Run

Go to work-center view Cost and Revenue Periodic Tasks Revenue Recognition.

Select the Revenue Recognition Run executed previously and click on Copy.

Change the description of the run:

Description Order <Sales Order ID> after invoice

Click on Start Now.

Wait until the run completes. When button Display Log gets available, click on it.

Select the line of set of books US GAAP and click on View.

Check tab Postings.

Check tab Processed Successfully. The sales order lines just created should appear.



Open the tab, open sub-tabs Advanced Information, Event Based. Click on Click here to execute the query. You will

see the result of the calculations done by the revenue recognition run.

Close it.

Check effect of the Revenue Recognition Run in reporting

Go back to report Revenue Accounting Contract List - Key Figure Overview. Refresh it.

If this report is no longer open, open it again by executing these steps:

o Go to work-center view Cost and Revenue Reports List. Open report Revenue Accounting Contract

List - Key Figure Overview.

o In the selection area, enter the associated Revenue Accounting Contract ID and click on Apply.

Check the effect of the Revenue Recognition Run in columns Revenue, Contract Liability, Contract Asset: All

revenue has been realized, key figures Contract Liability, Contract Asset and Unbilled Receivables have been

cleared to zero. Costs have been fully realized as well.

Background: Both performance obligations are fulfilled. The amount agreed for the contract can and has been

realized. No further performance obligations exist. Therefore, the revenue can be realized fully.

Hint: At this point in time, you see the difference to revenue recognition without Revenue Accounting

Contracts. Now, the revenue assigned to a sales order item is the allocated amount, not the amount stated in the

sales order. In this case, only at sales order header level, totals are comparable to each other.

Log off from the system.



Copyright

© 2018 SAP SE or an SAP affiliate company. All rights reserved.

No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of

SAP SE or an SAP affiliate company.

The information contained herein may be changed without prior notice. Some software products marketed by SAP SE and its

distributors contain proprietary software components

of other software vendors. National product specifications may vary.

These materials are provided by SAP SE or an SAP affiliate company for informational purposes only, without representation

or warranty of any kind, and SAP or its affiliated companies shall not be liable for errors or omissions with respect to the

materials. The only warranties for SAP or SAP affiliate company products and services are those that are

set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be

construed as constituting an additional warranty.

In particular, SAP SE or its affiliated companies have no obligation to pursue any course of business outlined in this

document or any related presentation, or to develop or release any functionality mentioned therein. This document, or any

related presentation, and SAP SE’s or its affiliated companies’ strategy and possible future developments, products, and/or

platform directions and functionality are all subject to change and may be changed by SAP SE or its affiliated companies at

any time for any reason without notice. The information in this document is not a commitment, promise, or legal obligation to

deliver any material, code, or functionality. All forward-looking statements are subject to various

risks and uncertainties that could cause actual results to differ materially from expectations. Readers are cautioned not to

place undue reliance on these forward-looking statements, and they should not be relied upon in making purchasing

decisions.

SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other countries. All other product and service names mentioned are the trademarks of their respective companies. See http://global.sap.com/corporate-en/legal/copyright/index.epx

http://global.sap.com/corporate-en/legal/copyright/index.epx