You can amortize costs in the same ways that you recognize revenue:
- Directly against source records. This is the original recognition method supported by Revenue Management. It enables you to comply with legislation such as ASC 605.
- Against revenue contracts which are linked, via performance obligations, to source records. This is known as using multiple-element arrangements. It enables you to comply with legislation such as ASC 606 and IFRS 15.
Setup to Amortize Costs directly against Source Records
The topic Setting up Revenue Management provides full details of how to set up Revenue Management for both revenue recognition and cost amortization.
The setup required for cost amortization is the same as the setup required for revenue recognition, but with the following adjustments:
- Settings records must include Cost as a selected value type, and all mandatory fields must be completed. Mandatory fields typically include Balance Sheet GLA (Cost) and Income Statement GLA (Cost), and any fields that Revenue Management requires to perform its calculations such as Total Cost.
- Templates must specify a Cost Basis and must be linked to a settings record where Cost is a selected value type. A template's configuration will affect which fields are mandatory on the associated settings record.
Setup to Amortize Costs against Revenue Contracts
The topic Additional Setup for using Multiple-Element Arrangements provides full details of the additional setup required for both revenue recognition and cost amortization using multiple-element arrangements. This setup is additional to the setup detailed in Setting up Revenue Management.
When creating settings records for the revenue contract and performance obligation objects, remember to map the Cost fields to fields on the object. You can use the defaults suggested in Default Settings for Revenue Contract and Default Settings for Performance Obligation.