Scope
How is the 30/360 Ratable plan different from the Classic Ratable plan?
How is the 30/360 Ratable plan different from the Daily Ratable plan?
How is the Classic Ratable plan different from the Daily Ratable plan?
What are the various types of Ratable Revenue Recognition Plans in RevRec?
Summary
RevRec automatically generates revenue recognition schedules based on service start date and service end date. This article shows the calculations RevRec will use to establish monthly amounts.
RevRec defines a range of dates using the Half-Open approach (start <= x < end) where the service start date is inclusive while the service end date is exclusive| Ratable Revenue Recognition methods | Calculation | First Period | Last Period | Remaining Period | Example |
30/360 Ratable Plan | Considering each month to be a 30-day period, RevRec first calculates the revenue per day by dividing the Total Revenue by 360 days as per the 30/360 logic to arrive at the revenue per day. | The first month's revenue recognition number is prorated based on the number of days remaining in the first month. If the first month has 30 or more days, it is considered a full month | The last month's revenue recognition number is prorated based on the number of days remaining in the last month. If the last month has 30 or more days, it is considered a full month | Revenue for the remaining period, which is the period between the first and last month is calculated by dividing the remaining revenue by the number of remaining periods. | Here is an example to understand each scenario. |
| Classic Ratable Plan | RevRec first calculates the revenue per day by dividing the Total Revenue by the total number of actual days in a contract. | The first month's revenue recognition number is prorated based on the number of days remaining in the first month. If the first month has 28 or more days, it is considered a full month. | The last month's revenue recognition number is prorated based on the number of days remaining in the last month. If the last month has 28 or more days, it is considered a full month. | Revenue for the remaining period which is the period between the first and last month is calculated by dividing the remaining revenue by the number of remaining periods. | Here is an example to understand each scenario. |
| Daily Ratable Plan | RevRec divides the total contract value by the actual number of days in a contract and multiplies it by the number of days active in each month. | Not calculated | Not calculated | Not calculated | Here is an example. |
End Month Exclusive | RevRec generates Ratable plans that include a full month's revenue in the first month and none in the expiration month, even if the contract started mid-month. The full month's revenue is calculated for all months in between as well. | Calculated | Not calculated | Calculated | Here is an example. |