Create a revenue recognition rule

Overview

This guide explains how to create a new revenue recognition rule using the Create Revenue Rule interface. You will define the rule’s details, choose how revenue is distributed, and specify the conditions under which the rule applies.

Navigate to Accounting > locate Revenue Recognition section at the bottom > click Revenue Rule Library.

Step 1: Define rule information

In the Rule information section, enter the basic details for your rule.

• Name – Enter a unique and descriptive name for your rule.
  Example: Monthly SaaS Subscription Rule.
• Description – Provide a brief explanation of what the rule does and its purpose.
• Revenue account – Select the revenue account where recognized revenue will be posted.

Step 2: Configure revenue distribution

This section determines how and when revenue will be recognized.

2.1 Select the satisfaction type

• Point in time – Recognize the entire revenue amount at a single moment.
  If selected, the Trigger point field appears. For example, choose Invoice approval to recognize revenue when the invoice is approved.
• Over time – Recognize revenue over a period.
  When selected, the Revenue distribution method dropdown appears.

2.2 Choose the revenue distribution method

• Equally by days: Allocate revenue proportionally based on the number of days in each accounting period.
• Equally by month: Allocate the same revenue amount to each month, regardless of the number of days.
• Usage based: Recognize revenue based on the actual usage of a product or service in that period.
• Entitlement based: Allocate revenue based on specific entitlement events, such as feature activation or milestone delivery.
• Equally by months with estimated transaction price: Allocate equally by month using an estimated total transaction price, with later adjustments.

2.3 Adjust closed revenue difference

For over-time methods, select how to handle differences between initially recognized and final closed revenue:

• Front load: Apply the difference entirely to the earliest open period.
• Straight line: Spread the difference evenly across remaining open periods.
• Back load: Apply the difference entirely to the last open period.

Step 3: Set criteria for rule application

In the Criteria section, define which products or performance obligations the rule applies to.

1. Column – Choose an attribute to match against. Examples: Product, Pricing model, Contract item name, Product start date, Business entity.
2. Condition – Currently supports equals, meaning the column’s value must match exactly.
3. Value – Enter the matching value.

Click + Add filter to add more conditions. Multiple conditions use AND logic — the product must meet all conditions to match the rule.

To link multiple products to a single performance obligation, select Add more products to the POB.

Step 4: Save your rule

When all fields are complete:

1. Review the rule configuration.
2. Click Save (top-right corner) to create the revenue recognition rule.
3. The rule will now be available for allocation in revenue recognition processing.