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Separating Billing and Revenue in Support of the New Revenue Accounting Standard

Marc Weintraub
Vice President, Product Strategy

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 2017. PeopleSoft FSCM Update Image 10 includes enhancements
to PeopleSoft Contracts and Project Costing to support customers in their
transition to the new accounting standards.

Billing and Revenue

Enhancements provide customers the option of defining prices
for revenue separate from prices used for billing. With new Contracts functionality, customers
can identify a total contract price for revenue and for billing and then allocate
that price across contract line items. The
price assigned to a contract line for revenue recognition may be different than
the price of the line item for billing. In
Project Costing, new revenue rate sets can identify rates and markups for
revenue recognition that are different from the rates and markups used for billing
and the related contract line limit for revenue recognition may be different
from the billing limit. In addition, new attributes were added to
the contract enabling customers to identify prime contracts from subcontracts
and at the contract line level a new bundling attribute was added allowing customers
to group related contract lines.

Exhibit 1: Separating Billing
and Revenue on a Contract


The new revenue pricing
functionality is additive. At the
contract level, customers define if prices for billing and revenue should be
maintained separately. Contracts that do
not need separating pricing for revenue can continue using a single amount for
both billing and revenue.
PeopleSoft modules with existing automation to create contracts and recognize
revenue, such as Pay/Bill Management and Grants, have the option of using the
new functionality in the PeopleSoft Contracts and Projects modules.

Exhibit 2: Contract General Page

May Be Applied to Existing Contracts

After applying new
functionality, most existing contracts will be identified as not having
separate prices for billing and revenue as this was the case under prior versions. However, we expect customers will be reviewing
their existing contract base for impact over a period of time and that some existing
contracts will need to separately define revenue while others may not. The new functionality allows customers to
update existing contracts to take advantage of new pricing functionality as
that analysis occurs. Other contracts that
are still being analyzed for impact can continue functioning as they did under
prior versions until their review is complete.

Exhibit 3: New Revenue
Allocation Page

Additional Information

For additional detail
on the project and the enhancements included in PeopleSoft FSCM Update Image 10,
customers can review the Oracle PeopleSoft Red Paper ‘Separating Revenue from
’ under My Oracle Support.

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