The RAR add-on as SAP's solution

The SAP RAR add-on serves as a facilitator and automator of a revenue

accountant’s tasks. It assists the user in complying with various accounting
standards and guidelines, including IFRS 15. Compared to SAP SD’s original
interpretation of revenue recognition, some of its improvements include the
allowance of parallel accounting, the synchronisation of cost recognition with
revenue recognition, and the availability of various new, compulsory disclosures (e.g.
reports showing the disaggregation of revenues by different categories, contract
balance movements and upcoming revenues expected for outstanding POBs). SAP
RAR transactions can be executed in the GUI, in Fiori and on NetWeaver. The add-
on is available for SAP ECC systems (minimum prerequisite is release 6.05) and
SAP S/4HANA systems.

To achieve its goals, RAR can be integrated with various source applications from
which it will obtain details on order creations, modifications, invoices and
deliveries (Step 1 in Figure 4). Possible source applications include both SAP
software (SAP SD, CRM or Hybris) and third-party applications. Beforehand, it
should be configured which document types and item categories are considered to
be relevant for revenue accounting, and should therefore be moved to the SAP RAR
environment.
 Figure 2: Upon creation of a document in SD which is defined to be relevant to RAR (1), a set of
Revenue Accounting Items is created (2), one for each order item and one for each billing plan
invoice. After processing these items in the ‘RAI Monitor’ (transaction FARR_RAI_MON), a
matching RAR contract is created (3) according to predefined BRF+ decision rules (4).

The transmission to RAR occurs through a set of Revenue Accounting Items (RAI),
which will automatically create and update revenue contracts and performance
obligations based on a set of decision rules (Steps 2 and 3 in Figure 4). The
decision rules are predefined in the SAP Business Rule Framework plus (BRF+) and
assign a company’s goods and services to the equivalent performance obligation
types. They will moreover provide all necessary performance obligation attributes
(e.g. start date, duration) and, as explained below, will stipulate one of three
fulfilment types: event-based, time-based or percentage of completion.
Figure 3: Any follow-up actions to an event-based performance obligation, such as deliveries,
create Revenue Accounting Items in the RAI monitor (1). Upon processing these RAI, the
status of the RAR contract and its POBs will be updated (2).
As the name suggests, a performance obligation’s fulfilment type dictates how and
when a contractual commitment will be satisfied (Step 4.1 in Figure 4). Event-based
fulfilment indicates that the obligation to the customer is met upon execution of a
specific action (e.g. goods issue, posting of an invoice). Time-based fulfilment
causes revenues to be recognised throughout a given time, following a specified
deferral technique (e.g. linear distribution). Percentage of completion fulfilment
requires the user to manually record any developments in the fulfilment of a
commitment to a customer. 
For all performance obligations, invoices can be posted before, after or concurrently
with their fulfilment. Similarly to sales orders and contracts, all invoices will be moved
to SAP RAR via Revenue Accounting Items (Step 4.2 in Figure 4).
Subsequently, the user can periodically create revenue postings for one or more
contracts to both the general ledger and corresponding ledgers (Step 5 in Figure 4).
This is typically carried out during the closing of an accounting period. Considering
each performance obligation’s fulfilment type, the fulfilment transactions and events
that have thus far occurred, and the invoices thus far recorded, all relevant postings
can be simulated and created. The calculation of contract assets and contract
liabilities is performed in a predecessor program. Contract assets are revenues that
are recognised but not yet invoiced, whereas contract liabilities make up the opposite
category. Based on system configurations, contract assets and liabilities calculation
happen at the level of either the contract or its performance obligations. When
traditional GAAP requirements should equally be attended to, unbilled and deferred
revenues can be determined as well. For all postings, general ledger account
determination occurs based on a collection of BRF+ decision tables.

Figure 4: The various steps in a Revenue Accounting and Recognition process in SAP
SAP RAR furthermore facilitates various additional faculties, such as cost
recognition, right of return, contract modifications and contract combinations.

 Firstly, cost recognition can be activated for any chosen POB type.
Non-accrued costs of goods sold are then regarded as planned costs
and are only recognised upon fulfilment of the POB.
 Next, a right of return can be assigned to any distinct performance
obligation with event-based fulfilment. The percentage of sales which is
expected to be refunded is then deducted from the revenues and
recorded as a refund liability. This posting will be reversed upon the
expiration of the return privilege.
 Thirdly, alterations to the contract price, scope and characteristics
result in either a retrospective or a prospective change, depending on
the underlying business rules. A retrospective change constitutes
changes to both fulfilled and unfulfilled parts of the contract (cumulative
catch-up and altered future revenues). A prospective change affects
only the unfulfilled parts of the contract (altered future revenues).
 Finally, it’s possible to combine two or more related contracts that are
entered at or nearly at the same time, with the same customer. A single
source contract comprising all POBs will remain, while the other
contracts will be deleted.
User Process:

Period End Processing

In Revenue Accounting and Reporting (RAR), 3 step period end closing happens.
Step 1 – Transfer Revenue
Purpose: Identifies the revenue to be recognized at the end of the specified period. However, doesn’t post
any accounting entries.
SAP Path: Revenue Accountant > Revenue Posting > Transfer Revenue

By clicking on Transfer, a background job gets created.

The status of the job can be checked using Revenue Posting Jobs Monitor.
SAP Path: Revenue Accountant > Revenue Posting > Revenue Posting Jobs Monitor

Step 2 – Calculate Contract Liabilities and Assets

Purpose: Calculates Contract Asset or Liability at the end of the specified period. However, doesn’t post
any accounting entries.
SAP Path: Revenue Accountant > Revenue Posting > Calculate Contract Liabilities and Assets
By clicking on Transfer, a background job gets created.
The status of the job can be checked using Revenue Posting Jobs Monitor.

SAP Path: Revenue Accountant > Revenue Posting > Revenue Posting Jobs Monitor

Step 3 – Revenue Posting Run

Purpose: Posts accounting documents based on the calculation done in earlier steps.
SAP Path: Revenue Accountant > Revenue Posting > Revenue Posting Run

By clicking on Post, a background job gets created which will post accounting documents. Before posting,
simulation can be done to verify the entries.

The status of the job can be checked using Revenue Posting Jobs Monitor.

SAP Path: Revenue Accountant > Revenue Posting > Revenue Posting Jobs Monitor

Accounting Entries
Accounting entries gets posted from RAR during the period end processing in step 3. We shall consider the
following scenario as the basis to understand the accounting entries;

Step 1: Invoice Posting

Following will be the accounting entry posted during billing/invoicing. There is no role of RAR in this
entry;

Step 2: Invoice Correction (RAR) (Reversal of Invoice)

This is an entry from RAR which reverses the revenue recognized in Step 1. By this it nullifies the revenue
posted earlier and with subsequent entries RAR will post actual revenue as per IFRS 15;

Step 3: Recognize Revenue (RAR) (Upon Fulfillment)

With this set of entries, RAR recognizes revenue as per IFRS 15. However, it first posts the Transaction
Price and then adjusts it with the allocation effect. The result is nothing but the allocation of the POB for
the period;

Step 4: Contract Assets and Liabilities (RAR) (Balance in Receivable Adjustment)

With this entry Contract Asset/Liability is posted;

6. Configuration
IMG path for RAR configuration can be accessed by Transaction FARR_IMG.

In this section some of the important configurations are highlighted. Please note the configurations here
mentioned are not exactly the way it is arranged in FARR_IMG but have been put in line with the
concept/flow discussed in the earlier section.
Source Applications
Step 1: Sender Component
As discussed earlier, RAR can support multiple source applications. The source applications are defined as
sender component.
SPRO Path : Revenue Accounting – Inbound Processing – Revenue Accounting Item Management –
Define Sender Components

Sender Component is assigned to logical system and source document item types.

Step 2: Logical System

Define logical systems from which revenue accounting retrieves source items.
SPRO Path : Revenue Accounting – Inbound Processing – Revenue Accounting Item Management –

Define Logical Systems

Step 3: Source Document Item Types
The information flow from source applications is in the form of Order, Fulfillment and Invoice of a
contract. These are defined as Source Item Types.
SPRO Path : Revenue Accounting – Inbound Processing – Revenue Accounting Item Management –
Source Document Item Types

Adapter Reuse Layer

Step 1: Interface Components
This configuration activity provides access to the interface components that can be used when defining
revenue accounting item classes.
SAP provides preconfigured interface components that can be used immediately. These include basic
components, which are mandatory for each record type, as well as other optional components which can be
added to a Revenue Accounting Item Class.
SPRO Path : Revenue Accounting – Inbound Processing – Revenue Accounting Items – Define Interface
Components

Assign Structures, Prerequisite Components and Program Enhancements. Also define Key Fields and
assign Components to Class Type and Record Type.

Step 2: Maintain Revenue Accounting Item Classes

Define revenue accounting item classes and their technical attributes. For each Revenue Accounting Item
Class, it is required to define:
• The interface that you use to transfer revenue accounting item information to the system.
• The data store to be used for the revenue accounting items
SPRO Path : Revenue Accounting – Inbound Processing – Revenue Accounting Items – Maintain
Revenue Accounting Item Classes

Customer
fields can be added to the RAI structures / Revenue Accounting Item Classes

Step 3: Generate Interfaces for Revenue Accounting Item Classes

Generate the runtime objects resulting from the Revenue Accounting Item configuration.
SPRO Path : Revenue Accounting – Inbound Processing – Revenue Accounting Items – Generate
Interfaces for Revenue Accounting Item Classes

Step 4: Assign Upload Rules to Revenue Accounting Item Classes

Define behavior of revenue accounting item class during upload. It can be;
1. Create RAI as Processable Item. Consistent items are created as processable items and Erroneous items
are created as raw revenue accounting items.
2. Create RAI as Raw Item. Consistent items and erroneous items are created as raw revenue accounting
items.
SPRO Path : Revenue Accounting – Inbound Processing – Revenue Accounting Items – Assign Upload
Rules to Revenue Accounting Item Classes

Step 5: Define Exemption Reasons for Revenue Accounting Items

We can exempt revenue accounting items from processing. In this configuration define the reasons for so
and can specify whether the item can be restored or not.
This comes handy if there are issues with the Customizing or the item may be corrupt. The system then
moves these items to a separate table which excludes them from ordinary processing.
SPRO Path : Revenue Accounting – Inbound Processing – Revenue Accounting Item Management –
Define Exemption Reasons for Revenue Accounting Items

Step 6: Define Restoration Reasons for Revenue Accounting Items

Define restoration reasons to restore Revenue Accounting Items that are exempted with an exemption
reason. Once restored, they can be further processed in RAI monitor.
SPRO Path : Revenue Accounting – Inbound Processing – Revenue Accounting Item Management –
Define Restoration Reasons for Revenue Accounting Items

The option to Exempt or Restore RAI is available in Revenue Accounting Items monitor.
Business Rules Framework+
Step 1: Revenue Accounting Item Classes
BRF+ applications assigned to RAI classes to add business rules while creating/updating RA Contract and
POBs (Performance Obligations).
SPRO Path : Revenue Accounting – Inbound Processing – Revenue Accounting Item Management –
Assign BRFplus Applications to Revenue Accounting Item Classes

Step 2: Account Determination

Assign BRF+ application for account determination and FI postings.
SPRO Path : Revenue Accounting – Revenue Accounting Contracts – Assign BRF+ Applications to
Revenue Accounting Processes

Revenue Accounting Contract and POBs

Step 1: Accounting Principle-Specific Settings
Maintain different accounting treatment and presentation specific to Accounting Principle.
SPRO Path : Revenue Accounting – Revenue Accounting Contracts – Configure Accounting Principle-
specific Settings

Assign Company Codes to Accounting Principles.

SPRO Path : Revenue Accounting – Revenue Accounting Contracts – Assign Company Codes to
Accounting Principles

Step 2: Open and Close Revenue Accounting Periods

Configure whether an accounting period is open for revenue accounting related transactions. The settings
in this activity provide a revenue accounting perspective of period closing. This is more of a periodic
activity.
SPRO Path : Revenue Accounting – Revenue Accounting Contracts – Open and Close Revenue
Accounting Periods

Step 3: Number Ranges

Number Ranges – Contracts
Maintain number ranges for Revenue Accounting Contracts.
SPRO Path : Revenue Accounting – Revenue Accounting Contracts – Number Ranges – Define Number
Ranges for Contracts

Number Ranges – Performance Obligations

Maintain number ranges for Performance Obligations (POBs).
SPRO Path : Revenue Accounting – Revenue Accounting Contracts – Number Ranges – Define Number
Ranges for Performance Obligations

Number Ranges – Run IDs

Maintain number ranges for Performance Obligations (POBs). Run IDs are reference numbers that the
system uses to track background jobs created for revenue postings.
SPRO Path : Revenue Accounting – Revenue Accounting Contracts – Number Ranges – Define Number
Ranges for Run IDs

Step 4: Define Contract Categories

Define contract categories and assign number ranges to them.
SPRO Path : Revenue Accounting – Revenue Accounting Contracts – Define Contract Categories

Step 5: Define Performance Obligation Types

Define performance obligation types and their associated attributes. POBs can also derive their attributes
using BRF+ application.
SPRO Path : Revenue Accounting – Revenue Accounting Contracts – Define Performance Obligation
Types

Step 6: Condition Types

Maintain settings relating to condition types.
SPRO Path : Revenue Accounting – Revenue Accounting Contracts – Condition Types
Define Reserved Condition Types

Define Condition Types Not Requiring Allocation

Define Roles for Condition Types

Step 7: Define Fulfillment Event Types

Different event types can be defined to recognize fulfillment. As per IFRS 15, revenue is recognized upon
fulfillment.
SPRO Path : Revenue Accounting – Revenue Accounting Contracts – Define Fulfillment Event Types

Step 8: Change Message Control

Configure how the system handles certain messages for Revenue Accounting.
SPRO Path : Revenue Accounting – Revenue Accounting Contracts – Change Message Control

Period End Processing

Step 1: Define Posting Specifications for General Ledger Transfer
Maintain RAR posting related configuration like Posting Key, Document Type, Transfer Account for
Document Splitting, Profit Center and so on. FI documents posted during period end processing will be
based on this configuration.
SPRO Path : Revenue Accounting – Revenue Accounting Postings – Define Posting Specifications for
General Ledger Transfer

Step 2: Configure Account Determination for Specific Transactions

This configuration allows to define rules that system uses to determine the accounts to make certain
revenue-related postings. It can also be maintained in BRF+ application directly.
SPRO Path : Revenue Accounting – Revenue Accounting Postings – Configure Account Determination
for Specific Transactions