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Summary of the features and functionality of SAP Revenue

Accounting and Reporting (RAR) – Updated for RAR 1.3


July 28, 2016 | 9,787 Views |

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SAP Revenue Accounting and Reporting (RAR) was built from the ground up to help customers in their
efforts to handle the new revenue recognition regulations announced May 28, 2014 (IFRS 15 & ASC 606) to
be effective January 1, 2018 in countries adhering to US GAAP or IFRS. The solution automates many of the
revenue recognition and accounting processes and can simplify the tasks of revenue accountants in following
these new accounting guidelines. SAP Revenue Accounting and Reporting (RAR) (latest version 1.3) can
also assist customers in their efforts to be compliant with current accounting standards like ASC 605 or IAS
18. SAP RAR is complementary to SAP Finance solutions and is compatible with SAP ERP Financials and
SAP S/4HANA Finance.

Future and existing SAP RAR customers are constantly asking me to describe the functionality within SAP
RAR. So, to help answer these questions, a summary of the features and functionality available in SAP RAR
up through version 1.3 is listed below. The SAP RAR summary description is split into four categories: 1)
Revenue Accounting and Reporting (RAR) core features, 2) contract modification, 3) connection to
operational systems, and 4) migration of revenue documents to SAP Revenue Accounting and Reporting
(RAR) including transition. In addition, we have added sections on the roadmap, recently introduced Quality
Assurance capabilities (including in-flight and post-flight diagnostics), and recommendations on OSS note
application.

SAP Revenue Accounting and Reporting (RAR) Version 1.3 was “Released to Customer” (RTC) in December
2016 and is still part of the Early Adopter Care program; Release Notes
Revenue Accounting and Reporting (RAR) Core Features
Support for the 5-step process through business rules and event driven model (Multiple element arrangements
supported)

Contracts can be combined manually or automatically via rules if contracts have open items (contract-by-
contract processing assumed)

Automatic or manual creation of performance obligations (POBs)


Processing of compound performance obligations (covering requirement for essentiality and distinct POBs)

Automatic setting of stand-alone selling prices (SSPs)


Automatic allocations of the transaction price based on SSPs (Stand Alone Selling Prices) to the performance
obligations (POBs) / manual changes possible when needed
Automatic spreading of revenue to time based performance obligations according to individual rules / manual
changes possible when needed

Recognition of revenue via events (time based, event based or percentage of completion)
Changes to fulfillment type prior to fulfillment

Revenue presentation according to IFRS 15: Contract liability / asset calculated at contract level.

Revenue presentation according to traditional GAAP: Unbilled receivables / Deferred revenues


Parallel reporting (ledger solution / account solution)

Multiple accounting principles supported


Revenue accounting decoupled from operational systems

Additional flexibility of contract selection for posting, simulation and error handling

Faster period close – integrated in SAP financial closing cockpit, ability to shift erroneous contracts to the next
period for catch up posting

Right of return processes


Archiving (of completed Revenue Accounting Contract objects)

Support for S/4HANA Finance

Recognition of revenue – percentage of completion from Results Analysis


Contract combination of already fulfilled or invoiced contracts, cumulative catch-up can be triggered if
required. Reporting on historical information still available

Enhancements to automatic rules and manual determination of contract combination


Changes allowed to fulfillment type after posting (e.g. from time based RevRec type to Event based RevRec
type)
Finalization of performance obligation (without the need to adapt the operational document)

Enhanced work-list functions – retaining settings for distribution, conflict handling

Distribution of contract liability and asset drill down to performance obligations with customer specific logic
Estimated quantities for consumption based revenue recognition with final true up (no interim true-up)

Cost recognition
Capitalized cost of contract acquisition

Explanation for recognized revenue with associated change history to easily analyze and verify the revenue per
period
Selection of different levels of aggregation of revenue postings, parallel postings and additional and
customized checks
Foreign Currency Handling According to IAS 21/ASC 830

Different Currencies for Sales Order Items and Invoices


Aggregate G/L Postings by Debit/Credit Indicator

Enhanced Data Sources for Disclosures

Quality Assurance Capabilities


In-flight diagnostics (down ported to v1.2)

Post-flight data validation diagnostics (down ported to v1.2)

Transaction Integrity Assurance (planned for v1.3 SP3 in mid-August 2017)


Service acceptance events can now trigger revenue recognition

Contract Modification
Retrospective change, modification triggers re-allocation and cumulative catch up

Prospective change, allocation of the remaining revenue to the remaining performance obligations
Enhanced Capabilities / Flexibility for Contract Combinations

Automatic Rules/Manual Rules for prospective/retrospective modification


Minor improvements in conjunction with new foreign currency handling capabilities according to IAS 21
(IFRIC 22)/ASC 830

Connection to Operational Systems


SAP sales order, delivery and invoice integration out of the box via the integration component

Processing of bill of materials


Integration to systems for other SAP document types and non-SAP systems through adapter framework

Account determination – reference accounts required from operational applications


Reconciliation of integrated SAP components

CO/PA integration

Account Determination can be derived from any attribute in order item RAIs’ with the Business Rules
Framework (BRF+)

Predecessor Documents – an order item can contain a reference to a predecessor document, i.e. return
Reconciliation of operational applications and revenue accounting

BAdi implementation of generic reconciliation framework with non-SAP operational sender systems
Simplified processing of periodic billing plans
ERP SAP hybris billing, invoicing component (formerly SAP Billing Revenue Innovation Management
(BRIM)) sends the required revenue accounting data for order items, fulfillments and invoices
Reconciliation of revenue accounting items with contracts at bill of material Item level

Integration with CRM Service Contract (including Package Quotation, service contracts, service order and
service confirmation) as stand alone or in combination with ERP SD Billing

Integration with cost object controlling – transfer for percentage of completion from results analysis to revenue
accounting, revenue accounting transfers revenue allocation to results analysis.
Enhanced CO account assignments – additional CO account assignments possible in revenue accounting and
through to reporting
Performance obligation creation direct from billing items
Simplified Invoice Handling (e.g. for flat rate Telco contracts)

Inbound Processing: Exempt and Restore Revenue Accounting Items


Transfer of Future Billing Data (e.g. from milestone billing plans)

Migration to SAP Revenue Accounting and Reporting (RAR) including Transition


With SAP Revenue Accounting and Reporting (RAR), existing revenue contracts or revenue documents can be
moved to RAR for the remainder of their useful accounting lives. Typically, movement of existing revenue
documents from another revenue system is frequent among RAR customers. Please note that experience has
shown us that the data quality of the underlying revenue documents to be moved has a direct correlation on the
effort needed to move them to RAR.

Migration support – transfer all data per company code, existing sales order documents (excluding orders with
SAP SD revenue recognition)

Definition of packages of contracts for more granular migration

Define transfer date and status per migration package and company code
Package with latest transfer date can still be in status migration while older packages are already
productive
Operational items have to be assigned distinctly to a package

Transfer of data from SAP Sales and Distribution (SD) revenue recognition functionality

Operational load from SAP Sales and Distribution order items transfers recognized revenue
from SAP SD revenue recognition

Transition Support
General support for full retrospective and modified retrospective transition to ASC 606/IFRS 15

Create new accounting principle as copy of existing principle or new load of data

Calculate cumulative catch up


Comparison reporting (determine equity adjustment)

Switch off an accounting principle after comparison period


Operational load and transition for cost object controlling
Minor improvements in conjunction with new foreign currency handling capabilities according to IAS 21
(IFRIC 22)/ASC 830

Comments on the Roadmap of SAP Revenue Accounting and Reporting (RAR) beyond v1.3
SAP RAR is a flexible rule based and event based system that can be extended through project work or
customizations to cover additional requirements beyond its core capabilities. For each new SAP RAR release,
we consider many improvements to expand its core capabilities. For more information on the roadmap for SAP
RAR, please click here.
SAP customers wanting to provide feedback on any of these topics can contact their SAP sales representative
about joining the SAP Customer Engagement Initiative (CEI) for SAP RAR.

Comments on Quality Assurance and Critical Notes Recommended


The Quality Assurance Capabilities are valuable additions to the RAR solution based on the experience and
feedback of our customers. They also demonstrate the commitment of SAP to provide the right visibility to our
customers of underlying revenue accounting processes including the data quality of externally sourced
documents. SAP takes Quality Assurance seriously, and is essentially a rolling program, being proactive and
looking to engage with as many RAR customers as possible to ensure that they are running their projects and
programs with the latest software and best practices. With over 150 RAR projects being operated around the
world, SAP is constantly receiving feedback and updates from a variety these projects on a daily basis and is
always looking for ways to allow our customers to run better.
Current SAP RAR customers are always strongly encouraged to implement the latest support package for RAR
1.3 which can be found here (provide link). Based on customer feedback, we have added new Quality
Assurance capabilities, starting with RAR 1.3 SP02, that include a set of diagnostics intended to identify
problems usually rooted in poor data quality of feeder systems or accidental oversights by users. The following
RAR OSS notes related to Quality Assurance have been recently published: