Distribution

Applies to:Daily and monthly recognition over time

Distribution determines how to distribute the daily and monthly revenue amount when a partial month occurs at the start and/or end of the recognition term.

The following are the distribution options:

• Front load: Front load the revenue so you distribute the monthly amount in the partial month at the beginning only.
• Back load: Back load the revenue so you distribute the monthly amount in the partial month at the end only.
• Proration by days: Use the number of days to split the revenue amount between the two partial months.

Monthly distribution example

The following examples show how each option distributes revenue for partial months:

Scenario 1

• Service period: January 15 to April 14 of the same year
• Invoice item amount: $300

The distribution condition is as follows:

• Integer month: The service period is the whole period/month
• Revenue recognition rule: Monthly recognition over time (the revenue schedule is generated when posting the invoice)
• Recognition term: Invoice item service period
• Recognition rules rounding: not related as there is no rounding

The following table compares the three Distribution rules — Front Load, Back Load and proration by Days:

'Proration by Days' is calculated as follows:

Number of prorated days:17 + 14 = 31 days

January proration:17 days * $100/31 days = $54.74

April proration:100 - January Proration which is, 100 - 54.74 = 45.26

Scenario 2

• Service period: October 31, 2023 to February 22, 2024
• Invoice item amount: $816.11

Distribution condition is as follows:

• Revenue recognition rule: Monthly recognition over time (the revenue schedule is generated while posting the invoice)
• Recognition term: Invoice item service period
• Recognition rules distribution: Front load
• Recognition rules rounding: Round trailing

Distribution is calculated as follows:

Amount per day: $816.11/115 days = $7.09

First period: October 31, 2023 to November 29, 2023

Last period: January 31, 2024 to February 22, 2024

Last partial covered days: 23 days

Amount for partial days: $7.09 * 23 days = $163.07

Bucket count: 3 (3 full months)

Remaining amount: Invoice item amount - Amount for partial dayswhich is,$816.11 - $163.07 = $653.04

Amount for each full periods: Remaining amount/Bucket countwhich is,$653.04/3 = $217.68

The following table shows the distribution amount for each accounting period:

Scenario 3

• Service period: January 04, 2023 to January 04, 2024 (1 year + 1 day)
• Revenue amount: $100
• Revenue recognition rule: Recognize monthly over time

The distribution condition is as follows:

• Revenue recognition rule: Monthly recognition over time (the revenue schedule is generated while posting the invoice)
• Recognition term: Invoice item service period
• Recognition rules distribution: Proration by Days
• Recognition rules rounding: Round trailing

Distribution is calculated as follows:

Amount per day: $100/366 days = $0.27

Distribution amount for January 2023: $0.27 * 28 days = $7.56

Distribution amount for January 2024: $0.27 * 4 days = $1.08

Amount for rest full period days(February 2023 and December 2023): 100 - ($7.56 + $1.08) = $91.36

Amount for full 11 months(February 2023 to December 2023): $91.36 / 11 months = $8.30 (remainder excluded)

Remaining amount: $91.36 - ($8.3 * 11 months) = $0.06

Per the "Round Trailing" rule, $0.06 will be put as $0.01 from the last month to the front (from January 2024 to August 2023)

The following table shows the distribution amount for each accounting period:

Scenario 4

• Service period: 03/10/2025 to 12/31/2025 ( 297 days)
• Revenue amount: $97.09
• Revenue recognition rule: Recognize monthly over time

The distribution condition is as follows:

• Revenue recognition rule: Monthly recognition over time (the revenue schedule is generated while posting the invoice)
• Recognition term: Invoice item service period
• Recognition rules distribution: Proration by Days
• Recognition rules rounding: Round trailing

Distribution is calculated as follows:

Amount per day: $97.09/297 days = $0.32

Distribution amount for Mar: $0.32 * 22 = $7.04

Amount for rest full period days (April to Dec): 97.09 - $7.04 = 90.05

Amount for full 9 months: $90.05 / 9 months = $10.00 (remainder excluded)

Remaining amount: $90.05 - ($10.00 * 9 months) = $0.05

Per the "Round Trailing" rule, $7.09 will be put as $0.01 from the last month to the front

The following table shows the distribution amount for each accounting period:

Daily distribution example

The following example shows how each option distributes the revenue on daily basis:

• Service period:January18, 2023 to February 17, 2023
• Invoice Amount: 455 JPY

Distribution condition is as follows:

Revenue recognition rule: Daily recognition over timeRecognition term: Invoice item service periodRecognition rules rounding: Round trailing

Distribution is calculated as follows:

Amount per day: 455 JPY / (14+17) days = 14.677419 JPYwhich is approximately,14 JPY

First period: January 18, 2023 to January 31, 2023

Last period: February 01, 2023 to February 17, 2023

Distribution based on daily amount:

January 2023: 14 * 14 JPY = 196 JPY

February 2023: 17 * 14 JPY = 238 JPY

Remaining amount: 455 JPY - (196+238) JPY = 21 JPY

Per the "Round Trailing" rule, 21 JPY will be put as 1 JPY from the last month to the front (from January 28, 2023 to February 17, 2023)

The following table shows the distribution amount for each accounting period:

Rounding

Applies to:Daily recognition over time, Monthly recognition over time

Rounding rules determine how to handle any remaining revenue amounts. The following options are available:

• Round trailing: Calculate the remaining revenue amount. Starting on the last day of the recognition period and working back in time, add $0.01 per day until the remaining amount is consumed.
• Round last: Calculate the remaining revenue amount. Add the remaining amount to the last day of the recognition term.

Suppose you have revenue of $135.33 that is recognized daily over a 90 day period, where the daily recognized revenue amount is $1.50 after rounding:

• Amount: $135.33
• Recognition term: 1/1/2013 through 3/31/2013 (90 days)
• Remaining amount: $0.33 = $135.33 - [90 days * ( $135.33 / 90 days), rounded]

The following example shows how each rounding rule handles the remaining $0.33:

Transaction date

Applies to:Daily recognition over time, Full recognition on a specific date, Monthly recognition over time

You can define how to recognize revenue when the recognition term start date occurs before the transaction date.

For Daily recognition over time and Monthly recognition over time rules, the following options are available:

• Recognize revenue on the Transaction Date. Revenue that occurred after the recognition term start date, but before the transaction date, is recognized in the accounting period in which the transaction occurred.
• Ignore the Transaction Date. Ignore the transaction date and recognize revenue over the entire recognition term.

For the Full recognition on a specific date rule, the following options are available:

• Recognize all revenue on the Transaction Date Instead.
• Recognize revenue on the specified date regardless when the transaction occurred.

Suppose you have a revenue amount of $100 and want to know how the revenue is recognized based on this information:

• Revenue Rule: Daily recognition over time
• Transaction date: February 5
• Amount: $100
• Recognition term: January 1 to April 10
• Accounting periods: January, February, March, and April of the current year

This following shows how each Transaction Date rule distributes revenue into accounting periods:

Closed Accounting Periods

Applies to:Daily recognition over time, Full recognition on a specific date, Full recognition upon invoicing, Monthly recognition over time

This option determines how to recognize revenue when the recognition term start date occurs in a closed accounting period. One option is currently supported.

Any new revenue that occurs in a closed accounting period is recognized in the next open accounting period.