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Cash Basis Revenue Recognition (SOP 97-2)

Cash Basis Revenue Recognition (SOP 97-2). Aswin Shreemal & Anthony Vendhan. Who is ActivIdentity?.

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Cash Basis Revenue Recognition (SOP 97-2)

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  1. Cash Basis Revenue Recognition (SOP 97-2) Aswin Shreemal & Anthony Vendhan

  2. Who is ActivIdentity? ActivIdentity Corporation has provided identity assurance and credential management solutions to enterprise, government, and financial services organizations worldwide for more than two decades. Product Lines: • Strong Authentication Products • Enterprise Single Sign-On Products • Device and Credential Management Products • Authentication Devices and Card Reader Products

  3. Cash Basis Revenue Recognition - Summary • Revenue Cannot be recognized for the Goods and Services shipped to certain countries unless payment is received. • As per pronouncement SOP 97-2 collective Probable is one of the conditions to be met for Revenue to be recognized. • Orders booked and Invoiced for the customers specific to certain countries need to be Deferred. • Revenue can be recognized upon receiving partial or Full Payment

  4. Single Payment Vs Multiple Payments

  5. Accounting Entries Invoice Accounting Receivable A/C DR XXXX TO Unearned Revenue A/C CR XXXX Receipt Accounting Cash A/C CR XXXX TO Receivable A/C CR XXXX Revenue Recognition Entry after Receipt Generation (Automatic) Unearned Revenue A/C CR XXXX TO Revenue A/C CR XXXX

  6. Various Testing Scenarios • One Invoice One Receipt • One Invoice Multiple Receipt • Multiple Invoices One Receipt • Multiple Invoices Multiple Receipts • Receipt Reversal • Non Cash Basis Customer • Credit Memo Partial Before Receipt application • Credit Memo Partial After Receipt application • Credit Memo – Full Invoice Amount • Cash Basis to Non Cash Basis

  7. Customization of Revenue Recognition API Standard: Revenue is recognized by oracle standard process as and when payment is received. (Full or Partial) Revenue Recognition for Multiple Receipts: Scenario where Revenue can be recognized only after full payment is received needs customization. Revenue Recognition API: Oracle’s Revenue Recognition API needs to be customized to Unschedule Revenue on partial receipt and then Recognize full amount at the time of Final Receipt.

  8. Current Issues • Oracle recognizes revenue when payment is received either partial or full. If companies policy is to recognize revenue after full and final payment then customization is required. • Once revenue accounting wizard is used to Unschedule the revenue then subsequent receipts do not recognize revenue and same customization is required. Resolution : Above issues can be customized using Revenue Recognition API provided by oracle.

  9. Questions???

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