Revenue & Cost Recognition (Enterprise)
The following section only applies if Reaforce is used as the source system.
Using the template in Revenue & Cost Recognition, the translation from Cash Flow to Profit & Loss and Balance Sheet is defined (see the following screenshot).
Revenue and cost recognition settings can be entered at three levels: at Enterprise level, at Entity level and at Project level. Enterprise-level settings are overridden by Entity-level settings. Entity-level settings are in turn overridden by settings on the Project. After downloading and defining the data in the template, the file can be loaded into the application using the Upload button.
Within the Configuration worksheet (see the previous screenshot), groups can be defined in column A. In column B, a Percentage of Completion method can be assigned to each group (see the following explanation), whereby the Revenues from Reaforce are recognized as turnover in the Profit & Loss account. It is also possible to indicate per group whether and from what moment on costs should be activated (columns C and D).
If costs are not activated, then the costs will always be processed in the Profit & Loss account in accordance with the cash flow of the costs of Reaforce .
There are four methods of Revenue & Cost Recognition possible, namely:
1. Based on costs
For this method, the costs in the cash flow from Reaforce are leading. The turnover in the Profit & Loss account follows the costs from the cash flow. If there are no costs in the group, the revenues in the cash flow from Reaforce will appear as turnover in the Profit & Loss account.
2. Based on sales planning
In this method, the sales planning from Reaforce is leading. The revenues in the cash flow from Reaforce will appear as turnover in the Profit & Loss account in proportion to the sales planning.
3. Based on completed contracts
Completion of the construction phase from Reforce is leading. At the time of construction completion, the revenues in the cash flow from Reaforce will appear as turnover in the Profit & Loss account for all sold units.
For all units still unsold, the revenues in the cash flow will appear as turnover in the Profit & Loss account when these units are sold.
4. Based on sales – Cash flow planning
At group level, the total revenues in the cash flow from Reaforce are leading. The revenues per cash flow line are processed as turnover in the Profit & Loss account in accordance with the percentage share of the total revenues.
The following table indicates which methods of revenue and cost recognition can be selected for each Reaforce project type.
Method of Revenue and cost recognition based on | ||||
|---|---|---|---|---|
Project type | Costs | Sales planning | Completed contracts | Revenues |
Building projects | √ | √ | √ | √ |
Land projects | √ | n.a. | n.a. | √ |
Construction projects | √ | n.a. | n.a. | √ |
The Activated column determines whether expenses are recognized as costs in the Profit & Loss account. If Activated is set to Yes, costs will be activated from the defined start date. The costs are therefore recognized in the balance sheet as work in progress.
Work in progress will be released in proportion to the increase in turnover.
Within the Method Selection worksheet, the financial structure is shown in columns A, B and C (see the previous screenshot). This data originates from Reaforce as the source system. At the time of download, the list will be updated from the source. This refreshes the columns A to C.
WARNING:
It is therefore always advisable to update the list when creating the Financial Plan. If the code is missing in the Excel, it will be added. If the code in Excel no longer exists in Reaforce , this code will simply remain in the list.
Using column D, the link is made between the cash flow line and the group. This groups the individual cash flow lines of the source for Revenue & Cost Recognition. In case a cash flow line is not linked to a group, it will be shown in the Profit & Loss account in accordance with the cash flow.
In column E, it can be recorded for each cash flow line whether a provision must be made for capitalized costs.
If a provision is made for certain cash flow lines, then the capitalized costs of these cash flow lines (which are visible in the balance sheet under Assets - Work in Progress) are still recognized as costs in the Profit and Loss account until the start date of construction.
The provision for Work In Progress is released in its entirety on the start date of construction.
After the template has been set up, it can be uploaded to make the settings active. Depending on the level at which the template is uploaded (Enterprise / Entity / Project), it will be applied within the open and new plans.