Calculations for Revenue Plans Created on Subscription Events
This topic describes what happens when you clear the Create Revenue Elements for Subscription Revisions accounting preference. When you check the preference, the Create Revenue Plans On field, the preferred value is Revenue Arrangement Creation for all subscription items except usage items. For setup instructions and more details, see Setting the Optional Accounting Preference for Advanced Revenue Management.
After you set the Create Revenue Elements for Subscription Revisions preference, you can't change it.
For Recurring – Adjustable, Usage, and Commit Plus Overage subscription line types, the preferred value for the Create Revenue Plans On field is Subscription Events. When a subscription event starts creating a revenue recognition plan, the forecast revenue plan uses the full revenue amount. Instead, actual revenue plans are based on a series of virtual plans that use the subscription event amount. The recognition methods for these virtual plans treat the charge period as the relevant period.
You can use virtual plans to set custom dates for subscription quantity or pricing changes. The revenue recognition plan updates with changes to virtual plans from the period when they occur without recalculating the entire subscription term. Virtual plan details such as subscription charges, start dates, and end dates match the lines on the Billing Account page's Charges subtab.
Because of differences in dates and amounts, the forecast and actual revenue plans may not match at the line level. The following examples show how actual and forecast revenue plans are calculated for subscription events using two revenue recognition methods:
Don't use a custom revenue recognition method when the Create Revenue Plans On field is set to Subscription Events. This use case isn't supported.
For information and examples of recognition methods, see Straight-Line Revenue Recognition Examples in Advanced Revenue Management (Essentials). The examples share the following values:
-
Subscription term – 6 months, April 9 – October 8
-
Monthly charge – $100
-
Total revenue amount – $600
-
Billing date – the ninth day of each month, April – September
Straight-Line, by Even Periods Method
This method divides the revenue amount evenly across all periods. Currency amounts aren't prorated based on the number of days in any period. The virtual actual plans treat the charge period as the period.
The forecast plan spans seven periods with a total revenue of $600. The last period adjusts for any rounding errors in the previous periods.
Each virtual plan has a revenue amount of $100. The monthly charge is split evenly between the periods A and B, as shown in the following table. The actual revenue plan line is the sum of calculations for:
-
The days after and including the billing date (B)
-
The days before the billing date (A)
|
Period |
Billing Date |
Charge |
Forecast Plan |
Virtual Plan A |
Virtual Plan B |
Actual Plan A +B = |
|---|---|---|---|---|---|---|
|
Apr |
Apr 9 |
100.00 |
85.71 |
|
50.00 =Charge a ÷2 |
50.00 |
|
May |
May 9 |
100.00 |
85.71 |
50.00 =Charge a ÷2 |
50.00 =Charge b ÷2 |
100.00 |
|
Jun |
Jun 9 |
100.00 |
85.71 |
50.00 =Charge b ÷2 |
50.00 =Charge c ÷2 |
100.00 |
|
Jul |
Jul 9 |
100.00 |
85.71 |
50.00 =Charge c ÷2 |
50.00 =Charge d ÷2 |
100.00 |
|
Aug |
Aug 9 |
100.00 |
85.71 |
50.00 =Charge d ÷2 |
50.00 =Charge e ÷2 |
100.00 |
|
Sep |
Sep 9 |
100.00 |
85.71 |
50.00 =Charge e ÷2 |
50.00 =Charge f ÷2 |
100.00 |
|
Oct |
|
|
85.74 |
50.00 =Charge f ÷2 |
|
50.00 |
|
Total |
|
600.00 |
600.00 |
|
|
600.00 |
Straight-Line, Prorate First & Last Period Method
This method recognizes revenue equally across all periods except the first and last periods, which are adjusted for the number of days in the periods. Currency amounts are prorated for the first and last periods based on its number of days, divided by the total days between the revenue recognition start and end dates, inclusive. The virtual actual plans treat the charge period as the period.
The forecast plan has 183 days with a total revenue of $600. The last full period adjusts for any rounding errors in the previous periods.
Since each service period in the actual plan spans parts of two months, each is prorated based on the number of days in each month. The actual revenue plan line is the sum of calculations for days before (A) and after and including (B) the billing date:
|
Period |
Billing Date |
Charge |
Forecast Plan |
Virtual Plan A |
Virtual Plan B |
Actual Plan A +B = |
|---|---|---|---|---|---|---|
|
Apr |
Apr 9 |
100.00 |
72.13 =600 ÷183 ×22 |
|
73.33 =charge a ÷30 ×22 |
73.33 |
|
May |
May 9 |
100.00 |
100.33 = (600 – 72.13 + 26.23) ÷ 5 |
26.67 = charge a – 73.33 |
74.19 =charge b ÷31 ×23 |
100.86 |
|
Jun |
Jun 9 |
100.00 |
100.33 = (600 – 72.13 + 26.23 ) ÷ 5 |
25.81 = charge b – 74.19 |
73.33 =charge c ÷30 ×22 |
99.14 |
|
Jul |
Jul 9 |
100.00 |
100.33 = (600 – 72.13 + 26.23 ) ÷ 5 |
26.67 = charge c – 73.33 |
74.19 =charge d ÷31 ×23 |
100.86 |
|
Aug |
Aug 9 |
100.00 |
100.33 = (600 – 72.13 + 26.23 ) ÷ 5 |
25.81 = charge d – 74.19 |
74.19 =charge e ÷31 ×23 |
100.00 |
|
Sep |
Sep 9 |
100.00 |
100.32 = (600 – 72.13 + 26.23 ) ÷ 5 |
25.81 = charge e – 74.19 |
73.33 =charge f ÷30 ×22 |
99.14 |
|
Oct |
|
|
26.23 =600 ÷183 ×8 |
26.67 = charge f – 73.33 |
|
26.67 |
|
Total |
|
600.00 |
600.00 |
|
|
600.00 |