...
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.
...
FirstBit provides the functionality of phased revenue recognition that allows each entity to recognize revenue in process of contract obligations completing proportionally to based on costs accumulated incurred up to specific dates.
Configuration options
To be able to follow the rules of IFRS15, select the Enable the Phased Revenue Recognition Functionality option on the Administration > Settings > General Settings form. This functionality makes the Phased Revenue Recognition and WIP Costs Adjustments documents available for using.
...
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.
Default GL accounts
With For the functionality of phased revenue recognition turned on,you can use the following default GL accounts are added to on the chart of accounts (COA):
- Work-in-Progress GL account with Item, Project, and Customer Order as dimensions Expense Item as dimension. Cost Object also can be used as dimension if the Advanced Product Costing option is selected on the Administration > Settings > Production form.
- Contract Assets GL account in the Current Assets section of COA
- Contract Liabilities GL account in the Current Liabilities section of COA
- .
You can use the these default accounts or add other accounts to the corresponding sections.
...
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 the work-in-progress costs
For registering the related purchases, you can use Invoices Received with specified Entity, Department Warehouse, Company, Contract. All purchased materials should be recorded You can record the purchased services directly to a Work-in-Progress GL account and assigned to the involved department.
Note. If However, the purchased materials were initially assigned to other department, you can and inventory items should be recorded to an intended warehouse, and then you will need to use Inventory Transfers to reassign them to the correct department. All materials and inventory items must be transferred assign the materials to the department ( that executes the project or customer order ) and record them to a Work-in-Progress GL account with the corresponding Cost Object before you can recognize the corresponding revenue based on the costs incurred..
Also, for tracing related costs, you can use the following documents: Debit NoteNotes, Inventory ReceiptReceipts, Other Expenses, bank documents with Other transaction type, and Employee Expense ReportReports. You will need to replace the default account with the Work-in-Progress account and specify the cost object.
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
...
For this, when creating a document, you need to replace the default expense account with the Work in Progress account. If a particular employee worked only for a specific Cost cost object, you can specify this cost object in any payroll-related document.
...
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.
...
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.
On posting the document, the listed costs are moved from the WIP GL account to the account of Costs of Completed Works ; and the corresponding percent of planned revenue is recorded to the Contract Assets GL account while the remaining planned revenue remains recorded to the Contract Obligations account.
For each subsequent phase, except for the final phase, you can create a new Phased Revenue Recognition document.
...
- Work in Progress Balances
- Statement of Work in Progress
- Costs of Completed Works
- Costs of Completed Works by Project
For details, refer to Accounting: Reports.
Issuing a final Invoice
When all phases are completed and all obligations are satisfied, you can issue an Invoice that would request payment for all the works within the contract or related to a the project. In this invoice you can list the Works and Services involved in the last phase of contract completion and the associated costs. Also, you can include all the Phased Revenue Recognition documents related to the contract or project with all the details. The invoice will include the applicable VAT amounts.
...