Revenue calculation logic
Understand how Zuora Revenue compares RTD and TCV and generates Variable Consideration entries during Rip and Replace processing.
The Rip and Replacement process evaluates the revenue position of each ripped transaction based on the current open period.
The application compares:
Revenue Recognized to Date (RTD) of the line
Total Contractual Value (TCV) of the line
The resulting comparison determines the Variable Consideration entries created for both the ripped and replacement transactions.
Scenario 1 - Revenue recognized is greater than TCV
Condition
Revenue Recognized to Date of the line > Total Contractual Value of the line
Result
The application creates variable consideration for the above difference
Transaction | Variable Consideration |
|---|---|
| Ripped Line | Positive |
| Replacement Line | Negative |
The Positive Variable Consideration for the ripped line is recognized during the rip period.
Scenario 2 - Revenue recognized is lesser than TCV
Condition
Revenue Recognized to Date of the line < Total Contractual Value of the line
Result
The application creates variable consideration for the above difference
Transaction | Variable consideration |
|---|---|
| Ripped Line | Negative |
| Replacement Line | Positive |
The Negative Variable Consideration for the ripped line is recognized during the rip period.
Scenario 3 - Revenue recognized equals TCV
Condition
Revenue Recognized to Date of the line = Total Contractual Value of the line
Result
No Variable Consideration entries are generated.
Transaction | Variable Consideration |
|---|---|
| Ripped Line | None |
| Replacement Line | None |