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<ManualTopic ID="/baanerp/tp/onlinemanual/000337" xml:lang="en">
	<Header>
		<Title xmlns:ssa="http://www.ssaglobal.com" xmlns:HTML="http://www.w3.org/TR/REC-html40">Revenue Recognition (RR) and Cost of Goods Sold (COGS)</Title>
		<Keyword><Level1>RR and COGS</Level1>
		</Keyword>
	</Header>
	<AimSection><Paragraph>The purpose of recognizing revenue is to calculate revenue and to register the revenue in the project financial data. For long term contracts extending over accounting periods, recognition of revenue is permitted before the contract is complete. This information is later sent to Finance.</Paragraph>
		<Paragraph>Cost of Goods Sold (COGS) is the expense a company incurs in order to manufacture, create, or sell a product. It includes the purchase price of the raw material as well as the expenses of turning it into a product.</Paragraph>
	</AimSection>
	<GeneralSection><Paragraph>For a given contract, the revenue recognition is the process that leads to the calculation (and subsequent posting to the General Ledger) of the total revenue that the contractor estimates he has ‘earned’, based on the progress of the contract. This amount is independent of the amounts that have been billed/invoiced to the customer and does not represent any kind of cash flow.</Paragraph>
		<Paragraph>For a given contract, the cost of goods sold is the amount of money spent in the process of building a deliverable (for which revenue can be recognized) or the money spent on non-recurring activities (such as engineering design) that have been completed. The Cost of Goods Sold transactions are posted to the General Ledger.</Paragraph>
		<Paragraph>The transaction currency of the generated RR and COGS lines is the same as that of the project currency. While generating the RR and COGS for a new period, you can settle the previous financial results. When closing the project, the final calculation and the postings are done and the financial results are reversed. <Link href="/baanerp/tp/glossary/glossary#000377" role="glossary">Revenue Recognition</Link> and <Link href="/baanerp/tp/glossary/glossary#000327" role="glossary">Cost of Goods Sold</Link> can be determined at the project, extension, element and activity level depending on the method you select. The usage of element and activity depends on whether the project is controlled by element or controlled by activity.</Paragraph>
		<Paragraph><GUIRef href="" role="manual">Generate Financial Interim Results</GUIRef>
		</Paragraph>
		<Paragraph>You can select the RR and COGS methods to generate the financial interim results in the <Link href="/baanerp/tp/ppc/tpppc2260m000" role="session">Generate Financial Interim Results (tpppc2260m000)</Link> session; with the exception of the Completed Contract method.</Paragraph>
		<Paragraph><GUIRef href="" role="manual">Revenue Recognition Limit</GUIRef>
		</Paragraph>
		<Paragraph>You can set a limit on the revenue to be recognized. A maximum percentage is defined on the project and extension level. The default value is set to 100%. But the value can be overwritten. The percentage times the contract amount gives the maximum revenue that can be recognized (until the completion of the project). The revenue recognition limit is valid for all RR methods except the Completed Project method.</Paragraph>
		<Note><SectionTitle>Note</SectionTitle>
			<Paragraph>This percentage is ignored while closing the project and the final revenue (and COGS) is posted.</Paragraph>
		</Note>
		<Paragraph><GUIRef href="" role="manual">Methods to Recognize Revenue</GUIRef>:</Paragraph>
		<List><ListItem><Link href="/baanerp/tp/onlinemanual/000338" role="manual">Completed Project Method</Link>
			</ListItem>
			<ListItem><Link href="/baanerp/tp/onlinemanual/000339" role="manual">Percentage of Completion Method</Link>
			</ListItem>
			<ListItem><Link href="/baanerp/tp/onlinemanual/000341" role="manual">Milestone Method</Link>
			</ListItem>
			<ListItem><Link href="/baanerp/tp/onlinemanual/000340" role="manual">Reimbursement Contract Method</Link>
			</ListItem>
			<ListItem><Link href="/baanerp/tp/onlinemanual/000342" role="manual">Earned Revenue Factor Method</Link>
			</ListItem>
			<ListItem><Link href="/baanerp/tp/onlinemanual/000343" role="manual">Actual Revenue Method</Link>
			</ListItem>
		</List>
		<Paragraph><GUIRef href="" role="manual">Methods to Determine COGS</GUIRef>:</Paragraph>
		<List><ListItem><Link href="/baanerp/tp/onlinemanual/000344" role="manual">Completed Project Method</Link>
			</ListItem>
			<ListItem><Link href="/baanerp/tp/onlinemanual/000345" role="manual">Profit Percentage method</Link>
			</ListItem>
			<ListItem><Link href="/baanerp/tp/onlinemanual/000346" role="manual">Reimbursement Contract Method</Link>
			</ListItem>
		</List>
		<Paragraph><GUIRef href="" role="manual">RR Types Allowed per Contract Type:</GUIRef>
		</Paragraph>
		<TABLE width="0%" border="1"><TBODY><TR><TD><GUIRef href="" role="manual">Fixed Price</GUIRef>
					</TD>
					<TD><GUIRef href="" role="manual">Cost Plus</GUIRef>
					</TD>
				</TR>
				<TR><TD>Completed Project</TD>
					<TD>Completed Project</TD>
				</TR>
				<TR><TD>Percentage Completed</TD>
					<TD>----------</TD>
				</TR>
				<TR><TD>Earned Revenue Factor</TD>
					<TD>----------</TD>
				</TR>
				<TR><TD>Actual Revenue</TD>
					<TD>Actual Revenue</TD>
				</TR>
				<TR><TD>Milestone( only for projects controlled by activity)</TD>
					<TD>Milestone ( only for projects controlled by activity)</TD>
				</TR>
				<TR><TD>----------</TD>
					<TD>Reimbursement</TD>
				</TR>
			</TBODY>
		</TABLE>
		<Paragraph><GUIRef href="" role="manual">COGS Applicable for Various RR Types:</GUIRef>
		</Paragraph>
	</GeneralSection>
	<GeneralSection><TABLE width="0%" border="1"><TBODY><TR><TD><GUIRef href="" role="manual">RR Types</GUIRef>
					</TD>
					<TD><GUIRef href="" role="manual">Applicable COGS</GUIRef>
					</TD>
				</TR>
				<TR><TD>Completed Project</TD>
					<TD>Completed Project</TD>
				</TR>
				<TR><TD>Reimbursement</TD>
					<TD>Reimbursement</TD>
				</TR>
				<TR><TD>Percentage Completed</TD>
					<TD>Profit Percentage</TD>
				</TR>
				<TR><TD>Actual Revenue</TD>
					<TD>Profit Percentage/Reimbursement</TD>
				</TR>
				<TR><TD>Milestones ( only for projects controlled by activity)</TD>
					<TD>Profit Percentage</TD>
				</TR>
				<TR><TD>Earned Revenue Factor</TD>
					<TD>Reimbursement</TD>
				</TR>
			</TBODY>
		</TABLE>
		<Paragraph><GUIRef href="" role="manual">RR Types Allowed per Invoice Calculation Method (for Extensions):</GUIRef>
		</Paragraph>
	</GeneralSection>
	<GeneralSection><TABLE width="0%" border="1"><TBODY><TR><TD><GUIRef href="" role="manual">Contract Amount</GUIRef>
					</TD>
					<TD><GUIRef href="" role="manual">Budget Cost</GUIRef>
					</TD>
					<TD><GUIRef href="" role="manual">Actual Cost</GUIRef>
					</TD>
				</TR>
				<TR><TD>Completed</TD>
					<TD>Completed</TD>
					<TD>Completed</TD>
				</TR>
				<TR><TD>Actual Revenue</TD>
					<TD>Actual Revenue</TD>
					<TD>Actual Revenue</TD>
				</TR>
				<TR><TD>Percentage Completed</TD>
					<TD>Percentage Completed</TD>
					<TD>-----------</TD>
				</TR>
				<TR><TD>Earned Revenue Factor</TD>
					<TD>Earned Revenue Factor</TD>
					<TD>-----------</TD>
				</TR>
				<TR><TD>Milestones ( only for projects controlled by activity)</TD>
					<TD>Milestones ( only for projects controlled by activity)</TD>
					<TD>Milestones ( only for projects controlled by activity)</TD>
				</TR>
				<TR><TD>-----------</TD>
					<TD>----------</TD>
					<TD>Riembursement</TD>
				</TR>
			</TBODY>
		</TABLE>
	</GeneralSection>
	<GeneralSection><Paragraph><GUIRef href="" role="manual">Levels at which RR and COGS is calculated for the different methods:</GUIRef>
		</Paragraph>
	</GeneralSection>
	<GeneralSection><TABLE width="0%" border="1"><TBODY><TR><TD><GUIRef href="" role="manual">RR Types</GUIRef>
					</TD>
					<TD><GUIRef href="" role="manual">Applicable COGS</GUIRef>
					</TD>
					<TD><GUIRef href="" role="manual">Levels at which RR and COGS is recognized</GUIRef>
					</TD>
				</TR>
				<TR><TD>Completed Project</TD>
					<TD>Completed Project</TD>
					<TD><List><ListItem>Project</ListItem>
							<ListItem>Extension</ListItem>
						</List>
					</TD>
				</TR>
				<TR><TD>Reimbursement</TD>
					<TD>Reimbursement</TD>
					<TD><List><ListItem>Project</ListItem>
							<ListItem>Extension</ListItem>
							<ListItem>Element</ListItem>
							<ListItem>Activity</ListItem>
						</List>
					</TD>
				</TR>
				<TR><TD>Percentage Completed</TD>
					<TD>Profit Percentage</TD>
					<TD><List><ListItem>Project</ListItem>
							<ListItem>Extension</ListItem>
						</List>
					</TD>
				</TR>
				<TR><TD>Actual Revenue</TD>
					<TD>Profit Percentage/Reimbursement</TD>
					<TD><List><ListItem>Project</ListItem>
							<ListItem>Extension</ListItem>
							<ListItem>Element</ListItem>
							<ListItem>Activity</ListItem>
						</List>
					</TD>
				</TR>
				<TR><TD>Milestones (only for projects controlled by activity)</TD>
					<TD>Profit Percentage</TD>
					<TD><List><ListItem>Project</ListItem>
							<ListItem>Extension</ListItem>
						</List>
					</TD>
				</TR>
				<TR><TD>Earned Revenue Factor</TD>
					<TD>Reimbursement</TD>
					<TD><List><ListItem>Project</ListItem>
							<ListItem>Extension</ListItem>
							<ListItem>Element</ListItem>
							<ListItem>Activity</ListItem>
						</List>
					</TD>
				</TR>
			</TBODY>
		</TABLE>
	</GeneralSection>
</ManualTopic>
