Your BRIM Strategy Shouldn’t Be A Gamble

With SAPBRIM, companies can manage the entire Offer to Cash businessprocess. Tender preparation for physical products and services becomeseasier. Thanks to Convergent Invoicing, customers can combine all offers to oneinvoice.

IFRS (InternationalFinancial Reporting Standard) 15 imposes new guidelines concerning customercontracts with various components. The amount of the realized proceeds mustcorrespond to the ratio of the individual sales prices of the individualservices under the contract. The time of revenue recognition must occur at thesame time that the performance obligation is fulfilled. For this purpose, SAPoffers RAR.

Use casesof SAP BRIM and RAR

Thecombination of BRIM and RAR promises to be the ideal starting position forcompanies. Following are two use cases explaining why.

In thefirst case, a basic internet fee of 40 euro per month is offered with acontract term of two years. The package includes a laptop, which is priced at 1euro. Using BRIM, the items from the source systems are convergently invoicedand the invoice amounts are posted to the subledger Contract Accounts Receivableand Payable (FI-CA). RAR is used to identify the independent serviceobligations (the laptop and basic charge) of the customer contract. Thetransaction price (1+40*24 = 961) is allocated to the individual serviceobligations in relation to the EAPs and realized when the respective serviceobligation is fulfilled. Thus, when the contract is signed and the laptop ishanded over, the relational EVP of the laptop at the transaction price isalready recorded as revenue and not as the priced 1 euro.

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

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

Despite allthe obvious advantages, it should be noted that the use of BRIM with RAR canonly become a safe bet if it is implemented professionally. Due to theprinciple-based and therefore partly abstract revenue reporting according toIFRS 15, the adaptation of these principles to specific circumstances becomesmore difficult.

On thebusiness side, decisions must be made that will have a fundamental influence onaccounting practice. Experienced implementation partners provide support bothin conceptual design and technical implementation in order to achieve anoptimal revenue model for individual business areas.

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