Apttus Revenue Management Documentation (2024)

FAQs

What is the revenue recognition policy document? ›

Revenue recognition is an accounting principle used to determine when and how revenue is recognized or accounted for. Your business can apply different methods and policies when deciding how to recognize revenue. The type of business determines which policy to apply.

ASC 606 directs entities to recognize revenue when the promised goods or services are transferred to the customer. The amount of revenue recognized should equal the total consideration an entity expects to receive in return for the goods or services.

Revenue is generally recognized after a critical event occurs, like the product being delivered to the customer. The process involves identifying contracts, fulfilling performance obligations, determining transaction prices, and then recording revenue as these obligations are met.

Generally accepted accounting principles require that revenues are recognized according to the revenue recognition principle, which is a feature of accrual accounting. This means that revenue is recognized on the income statement in the period when realized and earned—not necessarily when cash is received.

This is the simplest example of revenue recognition—you deliver the product or service immediately upon purchase, and you record the revenue immediately. Revenue for one-time purchases should be recognized immediately. This is most common with one-time purchases, like buying groceries or one-time software packages.

Implementing ASC 606 standards involves a detailed review of your contracts, identifying and mapping out all performance obligations, determining the transaction price, allocating the transaction price to the performance obligations, and finally, recognizing revenue as these obligations are fulfilled.

What is ASC 606? Accounting Standards Codification (ASC) 606 provides businesses with a universal framework for recognizing revenue from customer sales. The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) released ASC 606 in May 2014.

Identify the customer contract. Identify the obligations in the customer contract. Determine the transaction price. Allocate the transaction price according to the performance obligations in the contract.

REVENUE CYCLE BUSINESS ACTIVITIES

Four basic business activities are performed in the revenue cycle: sales order entry, shipping, billing, and cash collection.

What is the revenue policy? ›

A revenue control and management policy establishes proper control over all receipts and receivables and helps ensure sound financial management practices. Governments should adopt a revenue control and management policy over revenues as an integral component of their overall financial policies.

Conditions for Revenue Recognition

The collection of payment from goods or services is reasonably assured. The amount of revenue can be reasonably measured. Costs of revenue can be reasonably measured.

Deferred revenue is recognized as a liability on the balance sheet of a company that receives an advance payment. This is because it has an obligation to the customer in the form of the products or services owed.

The new guidance on revenue recognition affects any reporting organization that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or ...