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Your BRIM strategy should not be a gamble

The pot is big. So are the stakes. Not only customer behavior and the requirements for individual product and price models, but also legal framework conditions make action inevitable.
Stella Schey, GTW
April 2, 2020
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This text has been automatically translated from German to English.

The increased demand for bundled multi-component contracts led to new rules for revenue recognition with IFRS 15. With SAP BRIM and the add-on RAR (Revenue Accounting and Reporting, with S/4 Hana 1809 including the add-on for SAP Sales Integration an integral part of S/4) designed by SAP for the purpose of standard-compliant revenue recognition, it is ensured that the accounting sheet is a good one.

BRIM provides the ability to manage the entire offer-to-cash business process from a single source. Offers for physical products as well as services can be created and combined into one invoice in Convergent Invoicing for the customer based on a valid contract.

IFRS 15 provides a new set of rules for customer contracts with multiple elements: The amount of revenue recognized must correspond to the ratio of the stand-alone selling prices (EVPs) of the individual services in the contract.

The timing of revenue recognition must occur simultaneously with the fulfillment of the performance obligation. This is where RAR comes into play. Two examples are used to reveal why the combination of SAP BRIM and RAR is the optimal starting hand: In the first case, a basic Internet fee of 40 euros per month is offered with a contract term of two years.

The package includes a laptop, which is priced at 1 euro. Using BRIM, the items from the upstream systems are invoiced convergently and the invoice amounts are posted to the subledger contract accounts receivable and payable.

RAR is used to identify the independent service obligations, i.e., laptop and basic charge, of the customer contract. The transaction price (1+40*24 = 961) is allocated to the individual performance obligations in relation to the EVPs and realized when the respective performance obligation is fulfilled.

Thus, when the contract is signed and the laptop is handed over, the EVP of the laptop relative to the transaction price is already recorded as revenue and not the priced 1 euro.

As a second case, two services are offered in a bundle. Together with a software license for 150 Euros, three years of support and maintenance are offered for 75 Euros per month.

In this case, too, the transaction price must be allocated to the performance obligations relationally to the EPPs. Since no physical transfer takes place here, the amount of the software license is realized at the time at which the user receives access to the software.

In addition, IFRS 15 requires the provision of more informative and relevant disclosures about revenue recognition. Since the effective date of January 1, 2018, it has come to a showdown for listed companies.

With the new revenue reporting guidelines, there is no chance for bluffs. With all the obvious advantages, it is important to note that the use of BRIM with RAR only becomes a safe bet if it is implemented professionally.

Due to the principle-based and therefore partly abstract revenue recognition under IFRS 15, the transfer of these principles to specific circumstances is made more difficult.

On the business side, decisions have to be made that will have a fundamental impact on accounting practices. Experienced implementation partners provide support in both conceptual design and technical implementation to achieve an optimal revenue model for individual business areas.

Some will be among the winners of digital transformation, some among the losers. SAP BRIM, together with RAR, provides the necessary starting advantage so that in the end it's not "Rien ne va plus."

https://e3mag.com/partners/gtw_gmbh/
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Stella Schey, GTW

Stella Schey, SAP BRIM & RAR Consultant at GTW.


Work on SAP Basis is crucial for successful S/4 conversion. This gives the so-called Competence Center strategic importance among SAP's existing customers. Regardless of the operating model of an S/4 Hana, topics such as automation, monitoring, security, application lifecycle management, and data management are the basis for the operative S/4 operation. For the second time already, E3 Magazine is hosting a summit in Salzburg for the SAP community to get comprehensive information on all aspects of S/4 Hana groundwork. With an exhibition, expert presentations, and plenty to talk about, we again expect numerous existing customers, partners, and experts in Salzburg. E3 Magazine invites you to Salzburg for learning and exchange of ideas on June 5 and 6, 2024.

Venue

Event Room, FourSide Hotel Salzburg,
At the exhibition center 2,
A-5020 Salzburg

Event date

June 5 and 6, 2024

Tickets

Early Bird Ticket - Available until 29.03.2024
EUR 440 excl. VAT
Regular ticket
EUR 590 excl. VAT

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Venue

Event Room, Hotel Hilton Heidelberg,
Kurfürstenanlage 1,
69115 Heidelberg

Event date

28 and 29 February 2024

Tickets

Regular ticket
EUR 590 excl. VAT
The organizer is the E3 magazine of the publishing house B4Bmedia.net AG. The presentations will be accompanied by an exhibition of selected SAP partners. The ticket price includes the attendance of all lectures of the Steampunk and BTP Summit 2024, the visit of the exhibition area, the participation in the evening event as well as the catering during the official program. The lecture program and the list of exhibitors and sponsors (SAP partners) will be published on this website in due time.