How To Fix FARR_RAI624 - New performance obligation will be created for item &1

SAP Error Message - Details

• Message type: E = Error

• Message class: FARR_RAI - Revenue Accounting Item

• Message number: 624

• Message text: New performance obligation will be created for item &1

Self-Explanatory Message

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Smart SAP Assistant

• What is the cause and solution for SAP error message FARR_RAI624 - New performance obligation will be created for item &1 ?

  The SAP error message FARR_RAI624, which states "New performance obligation will be created for item &1," typically occurs in the context of revenue recognition and contract management within SAP S/4HANA or SAP ERP systems. This message is related to the management of performance obligations under the new revenue recognition standards (IFRS 15 / ASC 606).
  Cause:
  The error message indicates that the system is attempting to create a new performance obligation for a specific item in a contract. This can happen due to several reasons:
  
  Contract Structure: The contract may not be structured correctly, leading to the creation of multiple performance obligations when only one was intended.
  Item Configuration: The item in question may have attributes or settings that require it to be treated as a separate performance obligation.
  Revenue Recognition Rules: The rules defined for revenue recognition may dictate that a new performance obligation is necessary based on the characteristics of the item or the contract.
  Incomplete Data: There may be missing or incorrect data in the contract or item master that prevents the system from recognizing the performance obligation correctly.
  
  Solution:
  To resolve this error, consider the following steps:
  
  
  Review Contract Details: Check the contract associated with the item to ensure that it is set up correctly. Look for any discrepancies in the terms that might lead to the creation of multiple performance obligations.
  
  
  Check Item Configuration: Verify the configuration of the item in question. Ensure that it is set up correctly in the system and that its attributes align with the intended performance obligations.
  
  
  Analyze Revenue Recognition Settings: Review the revenue recognition settings in your system. Ensure that they are configured according to the applicable accounting standards and that they align with the business processes.
  
  
  Consult Documentation: Refer to SAP documentation or notes related to revenue recognition and performance obligations. This can provide insights into how the system is expected to behave and any specific configurations that may be required.
  
  
  Testing: If changes are made, conduct thorough testing to ensure that the issue is resolved and that performance obligations are created as expected.
  
  
  Seek Support: If the issue persists, consider reaching out to SAP support or consulting with an SAP expert who specializes in revenue recognition and contract management.
  
  
  Related Information:
  
  SAP Notes: Check for any relevant SAP Notes that may address this specific error or provide guidance on best practices for managing performance obligations.
  Training and Documentation: Review training materials or documentation related to revenue recognition in SAP, especially focusing on IFRS 15 and ASC 606 compliance.
  Community Forums: Engage with SAP community forums or user groups where similar issues may have been discussed, and solutions shared.
  
  By following these steps, you should be able to identify the root cause of the error and implement a solution to prevent it from occurring in the future.