Rev Rec calculation for an annual Rate Plan Charge

[JeanChristophe]

We expect to recognize our revenue billed upfront on yearly/annual rate plans on a monthly frequency.

We tried to recalculate the revenue and we cannot get the exact figure.

[JeanChristophe · Accepted solution]

For an annual charge amount = $100 we have :

The annual ($100.00) charge is divided by the number of days in a year in oder to have the amount recognized per day:

$100.00 / 365 = $0.27 ( rounded to 2 decimals ; based on the currency rounding ) per day

The total amount recognized is 365 * 0.27 = $98.82

The remainder amount is $100 - $98.82 = $1.18

The Rounding is :

This remainder is divided by 365 and this 'remainder per day amount' distributed to the end of the recognition period backward.
$1.18 / 365 < 0.01 , hence we distribute $0.01 per day over the latest 118 days of the period: