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In May 2014, the International Financial Reporting Standard (IFRS) Board introduced a new revenue recognition standard that changed the way companies recognize revenue for contracts in their financial statements. The new standard is IFRS 15 and it commences on or after 1st January 2018. The new ruling requires an entity to recognize revenue earned on a contract based on when the performance obligation is fulfilled or satisfied. That is, it can recognize the revenue once all the benefits have been received and the receiving entity gains control of the asset and can use the asset. The new standard will apply to all contracts with customers except leases, insurance contracts, financial instruments, guarantees and certain non-monetary exchanges. Industries that are most affected by this new rule are telecommunications, high tech, media, automotive & construction.

SAP launched the SAP Revenue Accounting and Reporting (RAR) application in 2015. It is an add-on solution. If you are using the SAP ERP Financials solution, and have an active maintenance agreement, you can use this application at no extra charge. The add-on solution automates the revenue recognition and accounting process and simplifies the tasks. The minimum release requirements before you can install the RAR solution is ERP 6.05 and above. To enhance the standard billing process, additional integration points were included in the SAP RAR application to retrieve extra data for the calculation of revenue. The additional data was enriched and normalized for processing ensuring audit compliance.

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