ANS-1398 · REVENUE RECOGNITION
How to Handle Retroactive Revenue Recognition in NetSuite When Periods Are Closed
Learn how NetSuite manages revenue recognition for backdated contracts or delayed processing, ensuring proper catch-up in open accounting periods.
Short answer
When a sales order's revenue recognition start date precedes the current open accounting period, NetSuite will divide the total revenue by the original number of periods. If the initial periods are closed, NetSuite performs a catch-up recognition for those past periods in the first available open period, then continues with normal recognition for subsequent periods.
Scenario
A NetSuite user has a sales order with a 12-month revenue recognition schedule that began in a prior month. The user needs to understand how NetSuite will handle revenue recognition if the initial periods are already closed, specifically whether the system will adjust the schedule to fewer months or perform a retroactive catch-up. This often occurs with backdated contracts where services began before the agreement was formally signed.
Solution
NetSuite handles retroactive revenue recognition by dividing the total revenue by the original number of periods. If the initial periods of the recognition schedule are closed, NetSuite will perform a catch-up recognition for the revenue pertaining to those closed periods in the first available open accounting period. Subsequent revenue will then be recognized normally over the remaining schedule.To manage revenue recognition when periods are not closed and past recognition is undesirable, or to control the catch-up period:
Put revenue recognition on hold. This can be done at the line level of the transaction or from the "manage revenue recognition" screen by clicking the "manage rev rec" button on the transaction.
Specify the desired catch-up period.
Save the transaction.
Once ready, release the hold.
Run the revenue recognition journal entries from the "on hold periods" in the specified catch-up period.This approach is particularly useful for scenarios such as backdated contracts. For example, if a support contract was intended to renew on 1/1/2015 but was signed on 3/1/2015, and services were provided from 1/1/2015, revenue for January and February would need to be recognized in March.
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