New POB Immediate

Information on the new POB Immediate type

When the Impairment Flag value is NEW POB IMMEDIATE, a new line is created with a POB as impairment for the impairment amount. The new line captures all the characteristics of the canceled line. Revenue of the impairment amount is recognized based on the start date and end date of the canceled line and the trigger for revenue release is Upon Booking.

In the following example, the three support lines are grouped into the same revenue contract based on the RC grouping template, which uses the sales order number as the grouping logic.

Table 1: Lines collected into Zuora Revenue


SO NO.	SO Line ID	Line Item	Ext. List Price	Ext. Sell Price	SSP %	Start Date	End Date
6001	601	Support	3600	1200	72	01-Jan-2019	30-Jun-2019
6001	602	Support	3600	2400	72	01-Jul-2019	31-Dec-2019
6001	603	Support	3600	3600	72	01-Jan-2020	30-Jun-2020

The initial entry for carves is created either at the time of schedule creation or at the time of billing when data is collected by Zuora Revenue. First, Ext. SSP Price for each line is calculated based on the following formula:

Ext. SSP Price = Ext. List Price * SSP %

Table 2: Extended SSP price calculation


SO NO.	SO Line ID	Line Item	Ext. List Price (A)	SSP % (B)	Ext. SSP Price (A*B/100)
6001	601	Support	3600	72	2592
6001	602	Support	3600	72	2592
6001	603	Support	3600	72	2592

Then, the RSP is calculated based on the following formula for each line:

RSP = Ext. SSP Price/Sum of Ext. SSP Price

The Allocated Price is calculated based on the following formula:

Allocated Price = Sum of Ext. Sell Price * RSP

The carve-in amount for the first line and the carve-out amount for the third line are derived.

Table 3: Carves calculation


SO NO.	SO Line NO.	Line Item	Ext. Sell Price (A)	Ext. SSP Price	RSP	Allocated Price (B)	Carves (B-A)
6001	601	Support	1200	2592	0.3333	2400	1200
6001	602	Support	2400	2592	0.3333	2400	0
6001	603	Support	3600	2592	0.3333	2400	-1200
Total			7200	7776

The revenue is scheduled based on the UPON BOOKING release event. The accounting entries are listed as follows:

Table 4: Schedule


NO.	RC ID	Line ID	Account Type	Currency	Dr	Cr	Period	Initial Reporting Entry Flag
1	6	601	Contract liability	USD	200		Jan-19
2	6	601	Revenue	USD		200	Jan-19
3	6	601	Contract liability	USD	200		Feb-19
4	6	601	Revenue	USD		200	Feb-19
5	6	601	Contract liability	USD	200		Mar-19
6	6	601	Revenue	USD		200	Mar-19
7	6	601	Contract liability	USD	200		Apr-19
8	6	601	Revenue	USD		200	Apr-19
9	6	601	Contract liability	USD	200		May-19
10	6	601	Revenue	USD		200	May-19
11	6	601	Contract liability	USD	200		Jun-19
12	6	601	Revenue	USD		200	Jun-19
13	6	602	Contract liability	USD	400		Jul-19
14	6	602	Revenue	USD		400	Jul-19
15	6	602	Contract liability	USD	400		Aug-19
16	6	602	Revenue	USD		400	Aug-19
17	6	602	Contract liability	USD	400		Sep-19
18	6	602	Revenue	USD		400	Sep-19
19	6	602	Contract liability	USD	400		Oct-19
20	6	602	Revenue	USD		400	Oct-19
21	6	602	Contract liability	USD	400		Nov-19
22	6	602	Revenue	USD		400	Nov-19
23	6	602	Contract liability	USD	400		Dec-19
24	6	602	Revenue	USD		400	Dec-19
25	6	603	Contract liability	USD	600		Jan-20
26	6	603	Revenue	USD		600	Jan-20
27	6	603	Contract liability	USD	600		Feb-20
28	6	603	Revenue	USD		600	Feb-20
29	6	603	Contract liability	USD	600		Mar-20
30	6	603	Revenue	USD		600	Mar-20
31	6	603	Contract liability	USD	600		Apr-20
32	6	603	Revenue	USD		600	Apr-20
33	6	603	Contract liability	USD	600		May-20
34	6	603	Revenue	USD		600	May-20
35	6	603	Contract liability	USD	600		Jun-20
36	6	603	Revenue	USD		600	Jun-20
37	6	601	Adjustment Liability	USD		1200	Jan-19	Y
38	6	603	Adjustment Liability	USD	1200		Jan-19	Y
39	6	601	Adjustment Liability	USD	200		Jan-19
40	6	601	Adjustment Revenue	USD		200	Jan-19
41	6	601	Adjustment Liability	USD	200		Feb-19
42	6	601	Adjustment Revenue	USD		200	Feb-19
43	6	601	Adjustment Liability	USD	200		Mar-19
44	6	601	Adjustment Revenue	USD		200	Mar-19
45	6	601	Adjustment Liability	USD	200		Apr-19
46	6	601	Adjustment Revenue	USD		200	Apr-19
47	6	601	Adjustment Liability	USD	200		May-19
48	6	601	Adjustment Revenue	USD		200	May-19
49	6	601	Adjustment Liability	USD	200		Jun-19
50	6	601	Adjustment Revenue	USD		200	Jun-19
52	6	603	Adjustment Liability	USD		200	Feb-20
53	6	603	Adjustment Revenue	USD	200		Feb-20
54	6	603	Adjustment Liability	USD		200	Mar-20
55	6	603	Adjustment Revenue	USD	200		Mar-20
56	6	603	Adjustment Liability	USD		200	Apr-20
57	6	603	Adjustment Revenue	USD	200		Apr-20
58	6	603	Adjustment Liability	USD		200	May-20
59	6	603	Adjustment Revenue	USD	200		May-20
60	6	603	Adjustment Liability	USD		200	Jun-20
61	6	603	Adjustment Revenue	USD	200		Jun-20

The revenue recognized for the first line is 2400 (1200 contractual revenue + 1200 carve in revenue) from January to June 2019. The revenue recognized for the second line is 2400 ( 2400 contractual revenue of the second line) from July to December 2019.

After the revenue has been recognized for 2019, the RORD line is collected in the Jan-20 period with the impairment flag being NEW POB IMMEDIATE to cancel the third line of the contract. Based on the contract modification rule, it triggers prospective allocation for the revenue contract.

Table 5: Impact of line item after change


SO NO.	SO Line ID	Line item	Ext. List Price	Ext. Sell Price	Start Date	End Date	Unscheduled Adjustment	Impairment Amount
6001	601	Support	3600	1200	01-Jan-2019	30-Jun-2019	0	0
6001	602	Support	3600	2400	01-Jul-2019	31-Dec-2019	0	0
6001	603	Support	3600	3600	01-Jan-2020	30-Jun-2020	-1200	0
6001	604		0	0	01-Jan-2020	30-Jun-2020	0	-1200

The carve-out amount of the canceled line becomes the impairment amount. A new line is created for that amount with impairment as its POB. The impairment amount is recognized immediately. See the table below for the accounting entries created when the third line is canceled with the impairment flag being NEW POB IMMEDIATE.

Table 6: Schedule after collection


NO.	RC ID	Line ID	Account Type	Currency	Dr	Cr	Period
1	6	603	Contract Liability	USD		200	Jan-20
2	6	603	Revenue	USD	200		Jan-20
3	6	603	Contract Liability	USD		200	Feb-20
4	6	603	Revenue	USD	200		Feb-20
5	6	603	Contract Liability	USD		200	Mar-20
6	6	603	Revenue	USD	200		Mar-20
7	6	603	Contract Liability	USD		200	Apr-20
8	6	603	Revenue	USD	200		Apr-20
9	6	603	Contract Liability	USD		200	May-20
10	6	603	Revenue	USD	200		May-20
11	6	603	Contract Liability	USD		200	Jun-20
12	6	603	Revenue	USD	200		Jun-20
13	6	603	Adjustment Liability	USD		1200	Jan-20
14	6	603	Contract Impairment	USD	1200		Jan-20
15	6	604	Contract Impairment	USD		1200	Jan-20
16	6	604	Adjustment Liability	USD	1200		Jan-20
17	6	604	Adjustment Liability	USD		1200	Jan-20
18	6	604	Adjustment Revenue	USD	1200		Jan-20

New entries are created when the cancelation of the third line is collected with the NEW POB IMMEDIATE impairment type flag. The unposted allocation recognition entries are deleted.

The impairment amount that gets debited in the canceled line and subsequently credited to the new line is moved to the adjustment liability account and then to the adjustment revenue account. The new POB created with the new line has the name of IMPAIRMENT, which is a seeded POB. The revenue for the impairment POB is recognized based on the start date and end date of the canceled line.

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New POB Immediate

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