ARM Process
ARM process begins with the approval of a revenue source transaction.
From an approved transaction a revenue arrangement can be automatically created.
Revenue arrangement is a transaction that represents the revenue contract. It contains the details of how revenue is going to be recognized.
Revenue elements are attached as lines on a revenue arrangement. The revenue element represents the lines on a source transaction.
Each revenue element has a forecast plan and one or more actual revenue plans that control the posting of revenue.
Revenue recognition plans indicate the posting period that revenue should be recognized and the amount to be recognized in each period.
Revenue allocation– With multi element sale the sales prices of an element may not be the same as their fair value. That is when we use revenue allocation. This process distributes revenue from a sale across its elements in proportion to their fair value amounts.
An actual revenue recognition plan is only created when a triggering event occurs. The triggering event can be Revenue arrangement creation, Billing, Fulfillment, Project milestone occurrence etc.
The revenue recognition plans provide the information required to recognize the revenue.
The actual revenue recognition plans then become the basis for creating revenue recognition journal entries and revenue reclassification journal entries during month-end processing.