Event Based Revenue Recognition - deferred revenue posted based on external event

[MartinDejl]

Hello Community,

We are running S4 Public Cloud and I'm currently working on solution for this business case:

- We sell product out of stock and no-stock material (prepaid service) to customer

- We need to bill the customer for both items at the same time so I suggest we have both items on one Sales Order, one category TAN, one category TAD.

- Revenue for the TAN item should be recognized with the billing document posting

- Revenue of the TAD item should be posted on deferred revenue account

- In moment customer applies for the prepaid service and the service is rendered. We could then get notified from external system and trigger the EBRR(at least that is how I imagine it based on all I could find and read about the EBRR).

- Additionally to the Sales Order, we would need to also create contract(revenue contract/provider contract?) where we would track the prepaid service due date(it expires). Customer can also purchase more than one prepaid services(e.g. bundle of 10) - we need to track in S4 how many "charges" are left and when do they expire.

I'm trying to make this work now for more than a week, read everything on EBRR and Universal Revenue Recognition and to be honest I'm getting lost, it's just overwhelming. I'm sure the solution is out there I just cannot grasp it. I'd need your help to get on the right track.

Thanks in advance!

Martin 

[Chuma]

Hello @Martin,

To defer revenue for prepaid (TAD/Z) items in S/4HANA Public Cloud, you must assign the correct Revenue Recognition Key (e.g., TDR or SVC) to the item category via SSCUI 102639 – Assign Rev.. Recognition Keys. This ensures billing posts to a Deferred Revenue account, not P&L.

Changing account assignment groups (XA, X5, X9) in the product master alone won't control revenue timing.

Yes, even if you use a Service or Provider Contract, a Revenue Contract is still required for compliance (IFRS 15 / ASC 606). The system automatically creates one when billing via Event-Based Revenue Recognition (EBRR).

Required Scope Items:

• 1GA – Event-Based Revenue Recognition – Sales Orders
• 57Z – Subscription Billing Integration (optional, for usage/entitlement tracking)
• 1J2 – Contract Accounting (optional)

Free feel to contact me if you need further information.

With regards

Chuma 

[MartinDejl]

Hello Chuma, thanks for quick answer. Really appreciate it. I tried to open the 102639 configuration but it's nothing about the recognition keys. Its called "Manage Default Account Assignment", it looks like something from CO? Is it the right SSCUI?

[Chuma]

Hello @MartinDejl 

Your business scenario involves combined billing for physical goods (stock items) and prepaid services (non-stock items), with revenue recognition timing differences. Here's a structured approach to address your case in SAP S/4HANA Cloud, Public Edition:

1. Sales Order Configuration

• Use Sales Order with mixed item categories:
• TAN: Standard item category for physical goods – revenue recognized upon billing.
• TAD (or custom Z* service category): For prepaid services – set to defer revenue at billing and trigger recognition later.

1. Revenue Recognition Logic

• Use Event-Based Revenue Recognition (EBRR)
• TAN items use a billing-based event, → revenue is posted upon invoice.
• TAD items use a deferred revenue account at billing, then manual/posting-triggered fulfilment to recognise revenue.

1. Tracking Prepaid Usage and Expiry

• Implement Provider Contracts via Subscription Billing Integration or Sales Contract with custom fields for:
• Number of uses (e.g., 10-pack)
• Expiration date logic (can be managed via custom business object in Key User Extensibility)

1. Revenue Contract Setup

• In Universal Journal, the billing triggers revenue contract creation for TAD items.
• Revenue is held until the event (service rendered) is received from the external system → trigger revenue recognition via Journal Entry

Let me know if you need further information

With regard

Chuma

[MartinDejl]

Hello Chuma,

Thanks a lot for drafting the proposed approach.

How to achieve this? So far, whatever we tried, e.g. testing with different item categories, different account assignment groups in product master(XA, X5, X9...). We always get the revenue posted immediately on the default revenue account:

• TAD (or custom Z* service category): For prepaid services – set to defer revenue at billing and trigger recognition later.
  • Set where and how?

If we make the Provider contract/Service contract work, do we then still need the Revenue contract? How would this be normally triggered - automatically from the Universal/Event-based revenue recognition?

Would you know, which scope items should we implement for this approach?

Thank you!
Martin