Recognition of Deferrals in Previous Periods

In MYOB Advanced, you can enter documents (such as AR invoices) that require recognition of revenue or expenses in previous financial periods—that is, in periods that are earlier than the period of the document date. When these documents are released, the system generates recognition transactions for each line of the document according to the specific set of settings of a deferral code specified for a line.

You can process the recognition of deferrals in different ways, depending on the recognition method that you specify for each particular deferral code. You configure deferral codes on the Deferral Codes (DR202000) form. Depending on the selected recognition method, you specify the particular set of settings for the deferral code.

The sections below describe the configuration of deferral codes that you can use for recognizing deferrals in previous financial periods.

Recognizing Deferred Revenue in Previous Periods

For documents (such as AR invoices and cash sales) that require revenue recognition in previous periods, you can use deferral codes with the Flexible by Periods, Prorate by Days, or Flexible by Days in Period recognition method specified. The period of the recognition start date can be earlier than the period of the document date. When these deferral codes are specified in a document line, the additional Term Start Date and Term End Date columns appear in the table on the Document Details tab on the document entry form, such as Invoices and Memos (AR301000). In these columns, you can define the required start date and end date of the recognition process for each document line with such a deferral code specified.

The date and posting period of the recognition transactions depend on whether the Allow Recognition in Previous Periods check box is selected for the deferral code on the Deferral Codes (DR202000) form:

• If the check box is selected, the deferred revenue will be recognized in periods that are earlier than the period of a document. The first recognition period is the period of the Term Start Date specified in a document, and the last recognition period is the period of the Term End Date. The dates of recognition transactions are generated based on the Document Date Selection setting specified for the deferral code on the Deferral Codes form.
• If the check box is cleared and the period of the recognition date is earlier than the document date, the recognition date of the generated transactions is equal to the document date, and the financial period is the period to which the document date belongs.

Recognizing Deferred Revenue and Expenses in Previous and Future Periods

For recognizing expenses as well as revenues in the periods that differ from the financial period of the document date, you can configure a deferral code with one of the following recognition methods specified: Evenly by Periods, Evenly by Periods, Prorate by Days, Evenly by Days in Period, or On Payment. For details, see Recognition Methods for Deferred Revenues or Expenses.

With these methods specified, you can set up the start recognition period to be either earlier than the period of the document date, or later than the period of the document date.

To define the start recognition period, you need to specify the Start Offset parameter while you configure a deferral code. This parameter defines the number of periods between the period of the document date and the start recognition period—that is, the period when recognition process starts. If you specify a negative value in this box (for example, –1), the recognition period will start one period earlier than the period of the document date. If you specify a positive value in this box (for example, 1), the recognition will start one period later than the period of the document date.

Assigning Deferral Codes to Non-Stock Items

You can assign a deferral code to a needed non-stock item on the Deferral tab of the Non-Stock Items (IN202000) form, so that when you enter that non-stock item in a detail line of a document, the system inserts the deferral code in the Deferral Code column of that line. If a deferral code is not assigned to a non-stock item, or if you want to override the deferral code that is filled in by the system, you can select a required one in the Deferral Code column in each required line when you enter a document.

When such a document is released, the system will generate a particular recognition schedule for each line of a document that contains a deferral code.

Posting Recognition Transactions

Once you have released a document that requires deferrals, the system generates an appropriate deferral schedule. This schedule contains the list of recognition transactions, each of which needs to be posted to a particular financial period. To release and post these recognition transactions, you need to run the recognition process on the Run Recognition (DR501000) form manually, or to set up an automatic schedule (as described in Automated Processing: General Information).

On the Run Recognition form, you select the required date and deferral code and, in the table, the transaction to be posted. Note that each time you run the recognition process, only one recognition transaction is released, even if multiple transactions are due according to the appropriate schedule.