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IFRS 15 standard establishes some new rules for annual reporting beginning on January 1 of 2018. It provides the rules on reporting and measuring the revenue incurred over time with the progress of long-term contract completing.

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FirstBit provides the functionality of phased revenue recognition that allows each entity to recognize revenue in process of obligations obligation completing proportionally to and costs accumulated up to specific dates.

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Also, you can choose where (in heading or in document lines) you need to place a reference to Customer Order, Project, or Project Task in Phased Revenue Recognition documents.

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You can specify the beginning balances for such contracts by creating the Accounting > See also > Opening Balances Entering documents with the Contract Assets and Work in Progress transaction types. For details, refer to Creating an Opening Balances Entering Document. The Contract Assets tab and Creating an Opening Balances Entering Document. The Work in Progress tab.

Tracing work-in-progress costs

For registering the related purchases, you can use Invoices Received with specified Entity, Department, Company, Contract. All purchased materials should be recorded to a Work-in-Progress GL account and assigned to the involved department.

Note. If the purchased materials were initially assigned to other department, you can use Inventory Transfers to reassign them to the correct department. All materials and inventory items must be transferred to the department (that executes the project or customer order) with the corresponding Cost Object before you can recognize the corresponding revenue based on the costs incurred.

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You can view the current costs of works in progress using the following report: Work in Progress Balances, Statement of Work in Progress.

To allocate costs with no specific Cost Object specified, at the month end you can use the WIP Allocations by Cost Object documents.

Tracing labor costs

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Once payroll is calculated, you can allocate the labor costs not associated with any particular cost object to multiple cost objects by using the WIP Allocations by Cost Object document with the Allocation of Labor Costs transaction type. For details, refer to WIP Allocations by Cost Object (Allocation of Labor Costs).

Allocating depreciation costs

Fixed assets are used for works on contracts. If a new fixed asset will be used only for such works, then you can select the WIP account as the default depreciation expense account in the Fixed Asset Entry document.

If the fixed asset will be used for such works or projects only in specific periods, you can replace the default depreciation expense account with the WIP GL account in the Fixed Asset Depreciation document manually for such specific periods. Also, you can specify a project and task or cost object for which this fixed asset is used.

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Using a Phased Revenue Recognition document, you can list the Services and Works that were completed at this phase. The list of costs related to completed Works is populated automatically based on the specific Cost Objects. You can manually edit the list of costs or add costs if needed. The revenue will be recognized according to the prices and quantities of the services and works that were completed. For details, refer to Phased Revenue Recognitions.

Note. Allocation of WIP costs including all the related labor costs and depreciation costs to costs objects should be performed before you create a Phased Revenue Recognition document.

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