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SAP BRIM RAR [shutterstock: 1423266245, Studio Romantic]
[shutterstock: 1423266245, Studio Romantic]
Blog Finance

Your BRIM Strategy Shouldn’t Be A Gamble

With SAP BRIM and add-on RAR (Revenue Accounting and Reporting), companies ensure that their balance sheets are up to par.

With SAP BRIM, companies can manage the entire Offer to Cash business process. Tender preparation for physical products and services becomes easier. Thanks to Convergent Invoicing, customers can combine all offers to one invoice.

IFRS (International Financial Reporting Standard) 15 imposes new guidelines concerning customer contracts with various components. The amount of the realized proceeds must correspond to the ratio of the individual sales prices of the individual services under the contract. The time of revenue recognition must occur at the same time that the performance obligation is fulfilled. For this purpose, SAP offers RAR.

Use cases of SAP BRIM and RAR

The combination of BRIM and RAR promises to be the ideal starting position for companies. Following are two use cases explaining why.

In the first case, a basic internet fee of 40 euro 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 source systems are convergently invoiced and the invoice amounts are posted to the subledger Contract Accounts Receivable and Payable (FI-CA). RAR is used to identify the independent service obligations (the laptop and basic charge) of the customer contract. The transaction price (1+40*24 = 961) is allocated to the individual service obligations in relation to the EAPs and realized when the respective service obligation is fulfilled. Thus, when the contract is signed and the laptop is handed over, the relational EVP of the laptop at the transaction price is already recorded as revenue and not as the priced 1 euro.

In the second case, two services are offered in a bundle. Together with a software license for 150 euro, three-year support and maintenance is offered for 75 euro per month.  In this case, too, the transaction price must be allocated to the service obligations in relation to the EVPs. Since there is no physical transfer, the amount of the software license is realized at the time the user gains access to the software.

In addition, IFRS 15 requires the provision of more informative and relevant information on revenue recognition. Since it came into force on January 1, 2018, there has been a showdown for listed companies. With the new guidelines on revenue reporting there is no chance for bluffs.

Despite all the obvious advantages, it should be noted that the use of BRIM with RAR can only become a safe bet if it is implemented professionally. Due to the principle-based and therefore partly abstract revenue reporting according to IFRS 15, the adaptation of these principles to specific circumstances becomes more difficult.

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

Some will emerge victorious from their digital transformation efforts, others will not. SAP BRIM and RAR can ensure that companies remain successful.

Source:
E-3 Magazine March 2020 (German)

About the author

Stella Schey, GTW

Stella Schey is SAP BRIM and RAR Consultant at GTW Management Consulting.

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