How to Distribute revenue for a 13 month term over 12 month period to give a free period? ASC606

[monique]

How can I distribute revenue for a 13 month term over a 12 month paid period in order to give a customer a free period???

[monique · Accepted solution]

You can set up your rate plan charge to:
Trigger Condition: Upon service activation date
End Date: Align to Subscription End Date
Billing Period: Annual to charge the customer for 1 year for this rate plan charge
Billing Timing: In Advance
Billing Day: Default from customer account
Billing Period Alignment: Align to Charge

You will then create the revenue rule to:
Recognition Model: Billing - Daily recognition over time
Recognition Term Start Date: Invoice Date
Recognition Term End Date: Subscription End Date
Round Trailing
Don't recognize revenue before the transaction occurs

You will create the subscription on the customer account:
13 month term
Select the rate plan charge name you created
Save contract effective date as the start date of the Term For example: starts on 12/01/2017
Service Activation date as 1 month after the contract effective date For example: starts on 01/01/2018

You will create the bill run for this customer:
Invoice date = 12/01/2017 You want the invoice to show this date
Target date= 01/01/2018 This is the beginning of the charge, this date will be the first date of the service period 01/01/2018-12/31/2018
Since this is an Annual charge

Once the invoice is posted, you can then view the revenue schedule, which will show revenue distributed for the 13 month term from 12/01/217-12/31/2018 for the annual charge.

I have attached screenshots for each step so you can set this up in your sandbox to test this out
Invoice

Revenue Schedule

Product Catalog Rate Plan Charge 

Subscription added to customer account

Revenue Rule set up

[bbond]

@monique how would this change for monthly recognition or is it possible?  I see that you can only recognize monthly from the invoice item period start or end.    I'm assuming I can mimick the same structure also for 2 free months etc.. ?  

[bbond]

@monique would you be willing to set up a meeting to discuss this?  I put a support ticket in some time ago and this wasn't able to be solved.  I have a few questions around this and also how it works with zuora cpq etc. 

[monique]

I sent you a private message for next steps.

[monique]

@bbond Hello,

You would not be able to use this for Monthly revenue recognition, only Daily over time. This is the only rule that will allow you to change the term end to Subscription end term.