About Full vs. Partial Revenue Recognition

When you recognize revenue (in SM Revenue Recognition), you can have the system perform either a full recognition or a partial recognition.

Full recognition occurs when the remaining deferral amount is sufficient enough to cover the scheduled recognition amount. Partial recognition occurs when the remaining deferral amount does not cover the scheduled recognition amount.

The following examples illustrate how the system performs full and partial recognitions.

Full Recognition

Agreement Amount: $12,000


Billed 1/1/19: $6,000


Billed 7/1/19: $6,000

Amortization Month Recognition Schedule Amount Balance Deferred Revenue Already Recognized Revenue Amount to Recognize
Billed 1/1/19: $6,000 6,000 0 --
Billed-to-Date: $6,000 01/2019 1,000 6,000 0 1,000
02/2019 1,000 5,000 1,000 1,000
03/2019 1,000 4,000 2,000 1,000
04/2019 1,000 3,000 3,000 1,000
05/2019 1,000 2,000 4,000 1,000
06/2019 1,000 1,000 5,000 1,000
Billed 7/1/19: $6,000 6,000 6,000 --
Billed-to-Date: $12,000 07/2019 1,000 6,000 6,000 1,000
08/2019 1,000 5,000 7,000 1,000
09/2019 1,000 4,000 8,000 1,000
10/2019 1,000 3,000 9,000 1,000
11/2019 1,000 2,000 10,000 1,000
12/2019 1,000 1,000 11,000 1,000

This example assumes that the revenue recognition process is run on a regular monthly basis. However, if you do not run this process monthly, the system calculates the total amount to recognize based on what is available (as defined by the amortization schedule and the available deferred revenue), and posts that amount to the specified month. So, using our example above, if you did not run the revenue recognition process until February, the system would recognize a total amount of $2,000 for February, even though February's scheduled amount is $1,000. This is because the amount scheduled for January still needs to be recognized, so it is included in the recognized amount for February.

Partial Recognition

The system will perform partial recognitions if the conditions require it; that is, if the remaining deferral amount is not sufficient to cover the scheduled recognition amount. Using the same Recognition Schedule defined above, let's say the first billing is less than the second billing:

Agreement Amount: $12,000


Billed 1/1/19: $5,500


Billed 7/1/19: $6,500

The result would be as follows:

Amortization Month Recognition Schedule Amount Balance Deferred Revenue Already Recognized Revenue Amount to Recognize
Billed 1/1/19: $5,500 5,500 0 --
Billed-to-Date: $5,500 01/2019 1,000 5,500 0 1,000
02/2019 1,000 4,500 1,000 1,000
03/2019 1,000 3,500 2,000 1,000
04/2019 1,000 2,500 3,000 1,000
05/2019 1,000 1,500 4,000 1,000
06/2019 1,000 500 5,000 500
Billed 7/1/19: $6,500 6,500 5,500 --
Billed-to-Date: $12,000 07/2019 1,000 6,500 5,500 1,500
08/2019 1,000 5,000 7,000 1,000
09/2019 1,000 4,000 8,000 1,000
10/2019 1,000 3,000 9,000 1,000
11/2019 1,000 2,000 10,000 1,000
12/2019 1,000 1,000 11,000 1,000

Note that for the month of June, only $500 of the scheduled $1,000 was recognized due to the fact that only $500 remained in the Deferred Revenue account. This left a balance of $500 to be recognized when the next payment was made (7/1/2019). When the amortization process was run at the end of July, the system included the $500 of unrecognized revenue for June in the Amt to Recognize for July.