Unearned revenue (also known as “prepaid liability” and “subscriber liability”) is made up of subscriber payments which have been processed but for which products have not yet been delivered. As products are delivered, unearned revenue becomes earned revenue.
Run this report at the end of each fiscal period to update the general ledger Unearned Revenue GL account. This account is credited for subscriber payments and debited as subscriptions are delivered. The Unearned Revenue report can be created in a summary form, listing totals by delivery method or district, or it can be created in detail form, listing individual subscribers as well. You may choose to create the report without updating the general ledger, to study account information.
Business Rules determine whether you report unearned revenue separately for a certain day of the week (such as Sunday). If you do, unearned revenue for this day will be displayed in a separate column from the other days. Otherwise, all unearned revenue will be reported in one column. Business Rules also determine if “earned” revenue is stored by Circulation (this may be necessary for taxing purposes).
Unearned revenue is calculated by first determining the remaining copies or publishing days in the subscription. This is done by subtracting the run date from the expiration date, and taking into account the subscriber’s delivery schedule and the publishing calendar. The average copy rate (based on the payment amount and the subscription period) is then multiplied by the number of days remaining in the subscription. Unearned revenue will be calculated differently based on whether the newspaper uses a single average copy rate or varies copy rates by day of the week.
Payment amount = 18.00 for a 3-month subscription
Average copy rate = 0.20
Subscription expiration date = 6/30
Report date = 5/31
Publishing days remaining in subscription = 6/30 - 5/31 = 30
0.20 x 30 days remaining in subscription = 6.00 unearned revenue
Payment amount = 18.00 for a 3-month subscription (Sundays = 22% of subscription, other days = 13% each)
Sunday average copy rate = 0.31
Average copy rate for other days = 0.18
Subscription expiration date = 6/30
Report date = 5/31
Sundays remaining in subscription (5/31 to 6/30) = 4
Other days remaining in subscription (5/31 to 6/30) = 26
0.31 x 4 Sundays remaining in subscription = 1.24 unearned revenue
0.18 x 26 other days remaining in subscription = 4.68 unearned revenue
Total unearned revenue = 5.92
If the subscriber renews early, the entire payment amount is included in the unearned revenue calculations. In addition, discount amounts are amortized over the subscription term, just as payment amounts are amortized. For example, say Circulation determines that the actual rate for the subscription discussed in the first example should be 20.00 (based on the subscription rate code):
Subscription rate 20.00 - Payment amount 18.00 = 2.00 discount amount for the subscription term
2.00 divided by 90 days (number of days in the subscription term) = 0.02, the average discount rate
0.02 x 30 days remaining in the subscription = 0.60
Discount amounts are shown in the Unearned Revenue report under the appropriate column (current payments, earned revenue, prior period, and so on), and on a separate line for each account (or summary total), along with any refund write-offs for the account.
Although payments make the most impact, unearned revenue is also adjusted by transfers, grace, refunds, and donations. A subscriber’s unearned revenue might be listed as shown here:
Prior Period Unearned Revenue
34.67
+
Payments
72.05
+
Transfers
-
Grace Paid
15.68
-
Refunds
-
Write-offs
-
Donations
-
New Unearned Revenue
54.37
+
Expire Changes
=
Current Earned Revenue (Sunday - 12.33) (Other - 24.34)
36.67
Notes:
If subscriber rates are changed within a subscription term, the subscription will not be affected (unearned revenue will be calculated based on the old rate). Only payments processed after the date of a rate change will be affected.
Earned revenue is calculated using this formula: Prior period’s unearned revenue + payments + transfers - refunds - donations - grace - writeoffs - current unearned revenue.
The formula for calculating current discounts is Prior period’s discounts + payment discounts - new unearned discounts = discounts earned.
If you offer day pass subscriptions, single day passes are earned when they are paid for, while day pass bundles are earned as they are used.
If you charge for bonus days using the “premium day” method (see Premium Day), premium amounts will be included in the full payment amount in the Payments column. The subscriber’s wallet amount will be included in their ending Unearned balance. Premium days are “earned” with a negative payment adjustment, and so amounts for premium days delivered during a period will not affect the Earned Revenue column. Instead they will be a negative adjustment to the Payments column. Therefore if the premium day is paid for and delivered within the same reporting period, it will have no impact on the Unearned Revenue report.
If any of the following activities have taken place since the last day of the period, a Historical Unearned or Grace Due should not be run.
Change in the Premium Day Calendar
Run any Premium Day processing
Note: If you are using Premium Day or a wallet of any kind, it is time sensitive.
To update unearned revenue and create the report:
Select Unearned Revenue from the Management menu to display the Unearned Revenue Report window.
Click Add and complete the following fields.
ALL ACCOUNTS
yes/no
Indicate whether unearned revenue should be run for all accounts. If you do not select this checkbox, the Account Ranges Entry screen will appear after completing this screen for entering specific accounts to include.
PRODUCT
setup
Enter the product for which unearned revenue should be updated (enter “*” to multi-select products).
START DATE END DATE
date
Enter the date range for which to run the report. If you are updating the general ledger, enter the first and last dates of this (ending) fiscal period. Final transaction processing and payment processing must be complete through the end date. No payments can be processed after this date until unearned revenue for this fiscal period is updated.
REPORT TYPE
predefined
Indicate whether this should be a detail or summary report.
UPDATE
yes/no
Indicate whether unearned revenue information should be updated in Circulation (the updated unearned revenue becomes the “Prior Period’s Unearned Revenue” the next time you generate the report). If unearned revenue has not been updated through the day prior to the START DATE, then PRIOR PERIOD will have only zeros.
CREATE G/L
yes/no
If you selected UPDATE, indicate whether general ledger entries for the unearned and earned revenue should be created.
EXPORT
yes/no
Select this checkbox if you want to create an export file.
FILE FORMAT
setup
Select the file map to use for this export. A file map must be set up previously.
FILE NAME
open
You can accept the default file name or modify it.
Click OK and then Continue to create general ledger entries (if Create G/L is selected) and the Unearned Revenue Report.
A warning message— “Unearned revenue report is already in process for the same parameters in update mode.” will be displayed if you run a second Unearned Revenue report while the first report with the same parameters is still being processed.
Account, Name
The subscription ID and name.
Prior Unearned Revenue / Disc
The subscriber’s unearned revenue at the beginning of the report period. The associated discount is displayed on the second line.
Earned Revenue / Disc
The portion of the subscription that was earned (delivered) during the report period. This will decrease the unearned revenue. The associated discount is displayed on the second line.
Payments / Disc
Payments that were effective in this report period. Payments increase unearned revenue. The associated discount is displayed on the second line.
Exp Chg / Disc
Changes to the subscription period caused by complaints or expire date modifications. These typically increase unearned revenue. The associated discount is displayed on the second line.
Transfer / Donations
Changes to the subscription period caused by money being transferred into or out of the account, or donations. Transfer-outs and donations decrease unearned revenue; transfer-ins increase it.
Grace / New Grace / Vac Pacs
If the subscriber was in grace during the report period, the value of the grace paid is displayed. The second line displays new grace. Any discounts for vacation packs are displayed on a third line.
Refunds / Writeoffs
If the subscriber received a refund during the report period, it is displayed in this column. Refunds decrease unearned revenue, and so do refund writeoffs, which are printed on the second line.
Unearned Revenue
The subscriber’s unearned revenue at the end of the report period.
Discounts
If the subscriber rate has a discount, the discount amount for each column will be displayed on the third line.
Columns in Second Section of Report
The second section of the report contains the subscription ID, name, current status, credit status, expire date, end grace date and invoice flag for subscribers currently in grace. The value of the grace days the subscriber has received within this reporting period is displayed in the Amount Owed column; the discount for that amount is listed in the Discount column. Note that Amount Owed is not the same as grace owed, which is typically created only after the grace period ends.
