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I would like to know the difference between the two revenue recognition methods which are:
1) Forecast - Actual
In effect, I didn’t make any difference between both. If we go based on forecast - actual, it looks at the total forecast and compares with the actual to arrive at the percentage of progress.
The same way, in wbs, it looks at the wbs cost tracking and this also looks at the total budgeted cost V/s Actual cost and arrives at the percentage.
I looked at a simple project with two hour transactions as actual which had a budget of 10,000. When I did a revenue recognition in both ways, I didn’t find any difference. Appreciate your response.
The Forecast-Actual approach compares the actual expense with the one that is recorded in the forecast model that you select to calculate the POC (percentage of completion) which is then used to calculate the revenue based on the contract value.
The WBS approach is basically doing the same but it looks for the budget/forecast that has been recorded with your WBS. Usually they are the same. However, if you have planning changes and update your forecast model then the POC that is calculated by using the first approach might be different from the second one.
So, all depends on how you record and update your forecast values that you use for calculating the POC.
Thanks for the quick response. That was a timely help...:-) Appreciate it....
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