Intellectual property management (IPM) refers to the oversight of a variety of intangible assets known as intellectual properties (IPs), such as musical, literary, and artistic works, discoveries and inventions, designs and symbols, and publications, movies, and television shows. Some of the industries that deal with IPs include high-tech, media and entertainment, and publishing, all of which manage the maintenance of IPs and their associated rights, and the selling and buying of IP rights.

While SAP CRM Intellectual Property Management (SAP CRM-IPM) functions come standard with SAP CRM, they require the user to follow processes that are different from standard SAP CRM transactions. Some of the key concepts about IPM master data and the sales and billing processes of license sales contracts are detailed in other articles in the CRM Expert knowledgebase. I now explain the revenue recognition process that occurs after rights and royalties of a license sales contract are sold.

The revenue recognition process in IPM includes a set of manual steps that are not necessary when processing billing-based revenue recognition for an SAP CRM or SAP ERP Central Component (SAP ECC) sales order. I introduce the key parts of SAP CRM-IPM revenue recognition and show how to configure the revenue process. My step-by-step guide to revenue recognition uses a flat-fee license sales contract as an example.

Key Parts of the SAP CRM-IPM Revenue Recognition Process

The revenue of a license sales contract is recognized in the SAP ECC system, but defining and maintaining revenue recognition rules (also known as a revenue recognition method) is done in the SAP CRM system. Revenue recognition and all other associated activities are carried out in the Accrual Engine. Figure 1 shows the relationship between the two systems.

Figure 1

Transfer of contract data in SAP CRM to the Accrual Engine in SAP ECC

Accrual Engine

The Accrual Engine is not visible to the end user. It is surrounded by applications such as SAP CRM and manual accrual that define the business content and use of the Accrual Engine. The Accrual Engine accumulates the revenue of a license sales contract. There are two main processes in the Accrual Engine: creating accrual objects and posting.

Creating Accrual Objects

When a license sales contract is released in an SAP CRM system, the contract-like master data is stored as basis data (accrual objects) in SAP ERP’s Accrual Engine. The structure of an accrual object is shown in Figure 2. This basis data contains all the relevant information for making the accrual postings and is called an accrual document. This document consists of only one line item without G/L accounts. The accrual object is:

• Time-dependent so that it can store a history of changes made.
• Created with the purpose of storing all information about a contract that is needed for posting accruals. For this reason, the accrual object has a hierarchical structure that corresponds to contracts and contract items. Contract items are called accrual subobjects.
• Uniquely identified in the Accrual Engine by a reference key and the subobject is identified by a reference subkey. In the case of IPM accrual, the accrual object and subobject are defined by a GUID – not a number.

Figure 2

Structural hierarchy of accrual object

Posting

When an accrual document is transferred to Financial Accounting (FI), which is usually done automatically, the Accrual Engine document creates an accounting document with two line items (debit and credit). This accounting document is called the initial sales posting. The accrual object is also periodically posted, generating periodic posting documents. This process involves account determination to determine the start and target G/L account and is covered later in the configuration section.

Important Entities in the Accrual Engine

The most important entities in the Accrual Engine are:

• The accrual type, which defines what is to be accrued (i.e., costs or revenue). It also determines which kinds of postings (opening or periodic posting) are done. The account determination usually depends on the accrual type. Table 1 shows a few different accrual types.
• The accrual method, which defines how the accruals have to be calculated (i.e., linearly or digressively). The user can program accrual methods as per business requirements.

Table 1

Accrual types for SAP CRM-IPM

Revenue Recognition Category

The item category of a royalty scope incorporates a revenue recognition category to determine financial posting of license sales contracts. The recognition category controls all relevant information that is required for revenue recognition, such as revenue recognition methods (accrual methods), start date for revenue recognition, and the start and end dates of the accrual object that control the loading of values into the Accrual Engine. Table 2 shows a few different types of revenue recognition category.

Table 2

Revenue recognition categories for SAP CRM-IPM

Accrual Type Mapping to Item Category

Revenue recognition categories are mapped to item categories in an SAP CRM system (Table 3). Because an item category can’t be changed once an IP is released, a default revenue recognition category is set for each item category. The user can change the revenue recognition category if the default category is not appropriate for the IP.

Table 3

Revenue recognition categories and accrual types mapping to item categories for SAP CRM-IPM

Configuration Settings

The accrual method specifies how amounts are to be accrued – for example, straight-line or declining-balance accrual. The accrual method is a configurable item and is defined in IMG path SAP ECC IMG > Financial Accounting > General Ledger Accounting > Business Transactions > Accruals for Rights Management > Revenue Recognition for License Sales > Accrual Calculation > Accrual Methods > Define Accrual Methods (Figure 3).

Figure 3

Accrual methods defined in SAP ECC for SAP CRM-IPM

These accrual methods are assigned to the IPM component through configuration in SAP ECC in IMG path ECC IMG > Financial Accounting > General Ledger Accounting > Business Transactions > Accruals for Rights Management > Revenue Recognition for License Sales > Basic Settings > Data Transfer from CRM > Assign Accrual Method (Figure 4).

Figure 4

Assigning accrual methods with the IPM component

Accrual types are used to control how accrual postings are to be made in the Accrual Engine in SAP ECC. Accrual types are defined in IMG path ECC IMG > Financial Accounting > General Ledger Accounting > Business Transactions > Accruals for Rights Management > Revenue Recognition for License Sales > Basic Settings > Accrual Types > Define Accrual Type (Figure 5).

Figure 5

Accrual types defined in SAP ECC for the IPM component

The account determination uses a generic tool (commonly called the derivation tool). It is maintained thorough the SAP ECC IMG. In this tool, the single steps (customizing tables, conditions, and attributes) are called derivation rules and the entries in the customizing tables are called rule values. Follow IMG customizing menu path ECC IMG > Financial Accounting > General Ledger Accounting > Business Transactions > Accruals for Rights Management > Revenue Recognition for License Sales > Accrual Posting > Account Determination > Define Set Rules (Figure 6).

Figure 6

Defining derivation rules in SAP ECC for account determination

If you double-click any of the derivation rules defined above (e.g., Document Type – With item category), you see details (Figure 7).

Figure 7

Derivation rule details

In Figure 7, start and target accounts depend on the process in the Accrual Engine and on the accrual type. The account determination can consist of more than one step:
For each step you can define a separate customizing table. In this example, I use six steps:

• In the first step, the document type is determined based on item category
• In the second step, document type is determined on accruals
• In the third step, the start and target accounts for license fee posting are determined
• In the fourth step, the G/L account is determined for cost type
• In the fifth and sixth steps, the G/L account is determined with and without a category ID, respectively

You can create the entries in the customizing tables in the same transaction by clicking the Maintain Rule Values button as shown in Figure 7. This takes you to Figure 8.

Figure 8

Defining source and target G/L accounts for account determination

Initial Sales Posting of a Flat-Fee Contract

In the sections below, I explain the process for an initial sales posting of a flat-fee license sales contract in SAP ECC, starting after the contract is created and released in SAP CRM. This process is performed in SAP GUI. You can create separate business roles for business users to perform revenue recognition, such as revenue processor.

What Is an Initial Sale Posting?

When a license sales contract is created and released in SAP CRM-IPM, contract-like data is transferred to SAP ECC creating an Accrual Engine document. When this Accrual Engine document is transferred to FI (which is usually done automatically), an accounting document with two line items (debit and credit) is created. This document is called an initial sales posting. In the case of initial sales entry, the target account is the accrual account or balance sheet G/L account and the start account is any account (this process is illustrated in Figure 9).

The initial posting usually posts the total value that is to be accrued against an accrual account or balance sheet G/L account. You can see this initial accounting posting document using transaction IPMTREE03. The key date shown during the initial posting is the revenue recognition date for the flat fee royalty scope.

The debit and credit indicators are determined from the sign of the accounting line item:

• If the value is greater than 0, then the debit indicator is set
• If the value is less than 0, then the credit indicator is set

Figure 9

Relationship between an accrual document and an accounting document (initial sales posting document

Accrual Document Transfer to Accounting

The transfer of Accrual Engine documents to accounting consists of the following steps (illustrated in Figure 10):

• The system transforms the Accrual Engine document into a temporary two-line document. These temporary documents are not saved. After this step, you can modify this temporary document with the Business Add-In (BAdI) ACEPS_BAPIPREDOC_MOD.
• The system summarizes the two-line documents and transforms them into another format, which is required by the BAPI, as described in the next step. These documents are not saved. After this step, you can modify the summarized documents with the BAdI ACEPS_BAPIDOC_MODIFY.
• Finally, this document is transferred to accounting by calling the BAPI BAPI_ACC_DOCUMENT_POST. This BAPI creates all the documents in accounting, such as the FI document and – if required - the managerial accounting document. These accounting documents are saved in the corresponding database tables.

Figure 10

Accrual document flow to accounting

As an example, consider flat-fee license fee contract 3007498. Execute transaction code IPMTREE03 in the SAP ECC system and enter contract number 3007498 and company code 2601 in the selection screen (Figure 11).

Figure 11

Selection screen to display accruals of a license sales contract

Click the execute icon (or press the F8 key) and the system displays accrual details (Figure 12).

Figure 12

Accruals and initial sales posting of license sales contract displayed in the Accrual Engine

Double-click the amount to be accrued under the Item Data tab (e.g., 1,000) in Figure 12 and then click the Postings tab. You then see details of the initial sales posting document with the posting amount. This posting entry is identified under the A column (Accrual Transaction) as I. If you double-click this posting line, a pop-up appears (Figure 13).

Figure 13

Initial sales accounting posting

If you double-click the highlighted accounting document in Figure 13, you see debit and credit line item details (Figure 14).

Figure 14

Debit and credit line details of initial sales accounting posting document

As shown in Figure 14, accounting document 2800048921 is posted against Accrual G/L account 23000000 and G/L account 1348100. Line item with G/L account 23000000 is credited and line item with G/L account 1348100 is debited. Here both the G/L accounts are balance sheet G/L, so revenue of license sales contract is not recognized yet.

Periodic Posting of a Flat-Fee Contract

In the sections below, I explain the process for periodic posting of a flat-fee license sales contract in the SAP ECC system. This process is performed in SAP GUI to actually recognize revenues of a license sales contract. You can use same business roles for business users to perform revenue recognition as that of initial sales accounting posting.

Periodic Accrual Run

The periodic accrual run is the process of periodically posting accrued values against a key date. The value of the Accrual Engine document is posted to the target account (i.e. target account is credited and the start account is debited). In the case of a periodic posting, the start account is the accrual account or balance sheet G/L account and the target account is usually the profit and loss G/L account (i.e., the revenue of a contract is actually recognized against the profit and loss G/L account). A periodic accrual run is executed using transaction IPMACT in the SAP GUI (this is demonstrated in the next section).

The input key date is important. Note that not all key dates are allowed. You can only enter those key dates that are defined by the settings of the accrual type. The allowed dates you can use as key dates in the periodic accrual run are determined by the frequency, which is entered in the posting control of the accrual type.
For example, if the frequency is per posting period, then only the last day of a period is allowed as a key date. Possible dates are then, for example, 01/31/2010 or 02/28/2010, but not dates such as 01/01/2010 or 02/15/2010. Figure 15 shows a daily posting frequency.

Figure 15

Daily posting frequency is defined against the Accrual Type

As an example, consider the same flat-fee license fee contract 3007498. Execute transaction code IPMACT in the SAP ERP system and enter contract number 3007498, company code 2601, key date for accruals of 01/13/2012, and execution type = N (normal run) in the selection screen (Figure 16).

Figure 16

Selection screen to post periodic accruals of a license sales contract

Click the execute icon (or press the F8 key) and the system displays the result of the accrual posting (Figure 17).

Figure 17

Result of periodic accrual run for license sales contract 3007498

Now re-execute transaction code IPMTREE03 and input contract number 3007498 and company code 2601 in the selection screen, as shown in Figure 11. Details of the accrual posting are displayed in Figure 18.

Figure 18

Periodic posting accounting document of a license sales contract displayed in the Accrual Engine

Double-click the amount to be accrued under the Item Data tab in Figure 18 and then click the Postings tab. You see details of the periodic posting accounting document with the posting amount. This posting entry is identified as under the A column (Accrual Transaction) as  P. If you double-click this posting line, a pop-up appears (Figure 19).

Figure 19

Periodic posting accounting document number

If you double-click the highlighted accounting document in Figure 19, you see debit and credit line item details in Figure 20.

Figure 20

Debit and credit line details of the periodic posting accounting document

In Figure 20, accounting document 2800036432 is created with balance sheet G/L or accrual G/L account 2950020 (debited) and profit and loss G/L account 4020100 (credited). Now if you compare accounting document 2800048921 created during the initial sales posting and the newly created accounting document 2800036432 created after the periodic posting, you see balance sheet G/L account 2300000 (also accrual G/L) was credited during the initial sales posting, whereas the same G/L is debited during periodic posting.