Chapter 5: Revenue Recognition

5.1: Unearned Revenue

Unearned Revenue is money received by UC San Diego in advance of having provided the services or goods. An example of this is a pre-payment. Unearned revenues are not yet revenues and therefore cannot be reported on the income statement. Instead, the unearned revenue amount must be reported on the balance sheet as a liability.

Example: UC San Diego engages in a consulting agreement for $60,000. The terms require a payment of $15,000 at the time the contract is signed, and $45,000 at the end of the project. The first $15,000 will be booked to unearned revenue and as revenue is earned based on completion of the work, revenue gets recognized (dr. unearned revenue, cr. Revenue).

Option only available in the Receivables Module - Use “deferred revenue scheduling rules” only for invoices that are assigned the In Advance invoicing rule. If you use a deferred revenue scheduling rule with a single accounting period, Receivables recognizes the revenue in the period specified. If the deferred scheduling rule is used with multiple accounting periods. Receivables creates the revenue recognition schedule based on the rule, and the start date is determined by the accounting start date provided. If the accounting start date occurs in a closed accounting period, Receivables posts that portion of revenue into the subsequent open accounting period.

Unearned revenue for project billing is something that the Accounts Receivable office in collaboration with the project team will continue to explore. This guide will be updated when more information is available.

Financial reporting to UC Office of the President (UCOP) requires revenue to be reported at the project segment level for all projects. At Oracle go-live, sponsored project revenue was not configured to post to the project segment due to the complexity of sponsored project billing and reliance on subledger reporting. With the transition of sponsored project billing from SPARCM to Oracle, this configuration is being updated.

Going forward, sponsored project revenue will post to the project segment, aligning sponsored projects with general project revenue treatment that has been in place since go-live.

Example 1 – Contract with one project 

• Contract: 400001-00001 

• Contract Owning Org: 2000020 

• Project: 2036239 

• Project Owning Org: 2000020 

• Invoice for $5,000 

Accounting for PPM Revenue: 

Accounting for AR Invoice: 

Accounting for AR Receipt Application: 

Example 2 – Contract with two projects 

• Contract: 400011-00001 

• Contract Owning Organization: 3000064 

• Project 1: 2036256 

• Project Owning Organization 1: 3000064 

• Project 2: 2036257 

• Project Owning Organization 2: 3000064 

• Invoice for $5,000 ($2,500 per project) 

Accounting for PPM Revenue: 

 Accounting for AR Invoice: 

Accounting for AR Receipt Application: 

Sponsored Projects continue to have Accounts Receivable transactions and PPM unbilled receivable transactions posted to Project 0000000. Internal Controls requirements only require departments to run the AR Aging Report by Financial Unit, and inclusion of the project number is not required for internal controls purposes. UCOP reporting requires revenue to be reported by project, which is satisfied through PPM revenue posting to the project segment.

To keep receivables in balance between Accounts Receivable and PPM, Receivables derives the Financial Unit from the Contract Owning Organization. Revenue derives the Financial Unit from the Project Owning Organization for all project types. 

Non sponsored Projects Receivables entries will continue to post to the project segment.

As part of the phased transition from SPARCM to Oracle sponsored project billing, revenue posting to the project segment has and will be implemented according to the following timeline:

• Letters of Credit (LOC) and Service Agreements (SSAs): Fall 2024
• Sponsored and PI Initiated Clinical Trials: Fall 2025
• Amount-Based Sponsored Projects: Fall 2025
• Cost-Reimbursable Sponsored Projects: July 2026

This phased approach ensures alignment with UCOP reporting requirements while supporting operational readiness across sponsored project billing types.