Advanced Revenue Pricing in Contracts

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued new revenue accounting standards in May 2014 with an effective date of 2018. PeopleSoft FSCM Update Image 18 includes enhancements to the Contracts module to support customers in their transition to the new accounting standards.

New Revenue Prices in the Enterprise Pricer

One of the key requirements in the new accounting standard is to recognize revenue using a product’s standalone sales price. This might be different from the price agreed to with the customer for billing, particularly in contracts that deliver multiple products and services. The Enterprise Pricer functionality within PeopleSoft Order Management was enhanced to allow customers to define product prices for revenue that are different from the prices used for billing. In previous releases, Price Lists and Price Rules in the Enterprise Pricer provided PeopleSoft Contracts with prices to support billing. Going forward, customers may configure a separate product price for revenue.


Exhibit 1:  Price List in the Enterprise Pricer

Revenue Allocations in Contracts

PeopleSoft Contracts was enhanced to use the new revenue prices in Order Management as a basis for revenue recognition. The total price of the contract is allocated across contract line obligations using revenue prices from Order Management as the basis for the allocation. The system provides a suggested revenue amount for the product/contract line with an ability to override. Significant changes were made to the Revenue Allocation page and Amendment Revenue Allocation page to include several new columns of data supporting the automated allocation.


Exhibit 2:  Revenue Allocation Page

Reviewing Product Sales Prices

New online views provide users an ability to review product prices across the organization’s contract base. Customers can compare a product’s current revenue price from the Enterprise Pricer to recent sales in Contracts. This review of recent sales can be used as a basis for establishing an initial set of standalone sales prices for revenue and on an ongoing basis to support decisions to change or retain existing prices.

Exhibit 3:  Review Product Sales

Additive

The new revenue pricing functionality is additive. At the contract level, customers define if prices for billing and revenue should be maintained separately and whether to use the automated allocation of revenue or to update revenue amounts manually. Contracts that do not need separate pricing for revenue can continue using a single amount for both billing and revenue.

Additional Information

Additional detail on these enhancements is included in the Oracle PeopleSoft Red Paper ‘ESA Advanced Revenue Pricing in Contracts’ (Doc ID 2127624.1) located with FSCM Update Image 18 Documentation for Enterprise Services Automation, Bug # 21922222.