Fair Market Value (FMV) and Minimum Commitment Support for Usage-Based Charges

Contents

• Overview
• Supported Charge Types
• How FMV Allocation Works
• FMV Allocation for Prepaid Unit Buckets
• Create a Contract with FMV Allocation
• View Revenue Allocation Summary
• Allocation Summary
• Preview Billing and Revenue Impact
• Revenue Allocation Algorithm Changes
• Limitations
• Best Practices

Overview

The Fair Market Value (FMV) enhancement extends revenue allocation support to usage-based charges and minimum commitment charges.

This release introduces:

• FMV allocation support for usage-based charges
• Minimum commitment allocation support
• Revenue allocation algorithm enhancements
• Allocation summary UI improvements
• Allocation visibility during contract changes
• Support for prepaid unit buckets with a unit price of $0.00 in FMV allocation calculations
• Enhanced FMV allocation for usage-based charges that recalculates the effective FMV using the remaining revenue and remaining usage quantity without restating revenue recognized in closed periods.

Feature Availability

Contact the Ordway team to enable this feature.

Supported Charge Types

The following charge models support FMV allocation processing:

The sample screenshot shows all the charge Types:

For more details about Charges Charge Basics – Ordway Support Portal  

How FMV Allocation Works

When FMV is enabled for supported charges:

• The system evaluates all eligible charges within the contract.
• Supported charges are included in the revenue allocation process.
• Revenue allocation schedules are generated based on eligible charges and FMV values.
• For usage-based charges, when additional usage quantities are added after revenue recognition has begun, Ordway recalculates the effective FMV using the remaining revenue and remaining usage quantity. Revenue recognized in closed periods is not recalculated.

For more details about FMV Fair Market Value (FMV) Basics – Ordway Support Portal 

The allocation summary displays:

• Included charges
• Allocation schedules
• Revenue allocation amounts
  

Configure FMV for Charges

• Configure Recurring Charges: Recurring charges can participate in revenue allocation when FMV is enabled for the charge.
• Configure One-Time Charges: One-time charges support explicit FMV values for allocation processing.
• Configure Usage-Based Charges: Usage-based charges can now participate in FMV allocation calculations. 
• Configure Minimum Commitment Charges: Minimum commitment amounts are included in allocation calculations and contract change reallocations.

Override FMV at the Subscription Charge Level

Subscription charges can override the plan-level FMV configuration when different allocation behavior is required.

For usage-based charges, you can override the Fair Market Value (FMV) at the subscription charge level by disabling Use Default from Plan.

To Override the FMV:

1. Open the subscription and edit the required usage-based charge.
2. Navigate to Accounting Information.
3. Disable Use Default from Plan.
   
4. Enter the required value in the Fair Market Value field.
5. Save the subscription charge.

When an override is configured:

• The subscription charge uses the specified FMV instead of the plan-level FMV. 
• Revenue allocation uses the overridden FMV for that subscription charge. 
• The override applies only to the selected subscription charge and does not modify the FMV configured on the plan.

Note: This capability is available only when the Override FMV at Subscription Charge Level feature is enabled. Otherwise, the Fair Market Value field remains read-only and inherits the value configured on the plan.

FMV Allocation for Prepaid Unit Buckets

When Wallet of Units is enabled, prepaid unit buckets with a unit price of $0.00 participate in Fair Market Value (FMV) allocation. When calculating FMV for Wallet of Units, Ordway uses prepaid unit buckets from the Billing Schedule Line (BSL). All prepaid unit buckets, including buckets priced at $0.00, are included when determining the total prepaid unit quantity used in the FMV calculation.

This ensures that all prepaid units participate in the FMV calculation while only priced buckets contribute to the prepaid monetary value.

Example: FMV Allocation Using $0.00 Unit Buckets

Assume the following prepaid unit buckets.

The associated usage charge has a configured FMV of $1.00 per unit. Because the total prepaid value ($120) is allocated across all 150 prepaid units, the calculated FMV used for revenue recognition is $0.80 per unit.

The following example demonstrates how prepaid unit buckets with a unit price of $0.00 affect the FMV per-unit calculation.

Calculation

• Total prepaid monetary value = $120
• Total prepaid units = 150
• FMV per unit = $120 ÷ 150 = $0.80

Although Bucket 2 has a unit price of $0.00, its 30 prepaid units are included when calculating the FMV per unit. As a result, the total prepaid value ($120) is allocated across all 150 prepaid units, resulting in an FMV of $0.80 per unit for revenue recognition.

FMV Allocation for Usage-Based Charges

Enhanced FMV allocation for usage-based charges that recalculates the effective FMV using the remaining revenue and remaining usage quantity without restating revenue recognized in closed periods.

How Remaining-Basis Allocation Works

When usage quantities change after revenue recognition has started, Ordway:

• Calculates the remaining revenue to recognize.
• Calculates the remaining usage quantity, including newly added value-add or free usage.
• Calculates a new effective FMV per unit using the remaining revenue and remaining quantity.
• Uses the new FMV per unit for future revenue recognition only.

Example: Remaining-Basis FMV Allocation

The following example illustrates how Ordway recalculates the FMV per unit after additional value-add usage is introduced.

Already recognized

Remaining

Additional value-add usage

30,000 impressions

Remaining quantity

120,000 impressions

New FMV

Result

Create a Contract with FMV Allocation

The following example demonstrates FMV allocation processing.

Example Scenario

In this example:

• FMV is enabled for all supported charges.
• Usage charges participate in revenue allocation.
• Minimum commitment amounts are included in allocation calculations.

View Revenue Allocation Summary

After the contract is created and activated:

1. Open the contract. Under Plans and Charges, click Allocation Summary.
   
2. The Allocation Summary dialog box is displayed.
   
3. Review the included allocation charges.

Allocation Summary

The Allocation Summary dialog box displays how revenue is allocated across subscription charge lines based on the configured Fair Market Value (FMV).

This dialog helps users review the allocation percentage and allocated revenue amount for each charge line.

Column Descriptions

Allocation Details

The dialog displays allocation details for multiple charge lines:

• Charge lines with configured FMV values participate in revenue allocation.
• Allocation percentages are calculated proportionally based on the FMV of each charge line.
• Revenue allocation amounts are derived using the calculated allocation percentage.
• Negative transaction amounts are displayed in red to indicate adjustment or reversal entries.

Total Summary

The Total row displays the aggregated values for:

• Total transaction amount
• Total FMV
• Total allocated revenue amount
• Total recognized revenue amount

Important

• Modify the FMV by editing the charge.
• To update the Fair Market Value for a charge line, edit the corresponding charge configuration.

For more details, how to edit a charge Edit a Charge – Ordway Support Portal 

Contract Change Allocation Processing

The feature also supports revenue allocation recalculation during contract amendments.

Example Contract Change Scenario

The demonstrated example includes:

• Contract change effective date: October 1
• Additional minimum commitment amount
• Updated allocation recalculation

Preview Billing and Revenue Impact

During contract amendments, the preview dialog displays:

• Billing impact
• Revenue allocation impact
• Updated allocation schedules
• Remaining allocation balances

Users can review allocation changes before saving the amendment.

Revenue Allocation Algorithm Changes

Introduces enhancements to the revenue allocation algorithm for contract changes.

Previous Behavior

Previously, all charges participated in reallocation processing during contract amendments.

Updated Behavior

• Fully recognized charges are excluded from reallocation. 
• Closed revenue periods are not recalculated. 
• For usage-based charges, changes to expected usage quantities recalculate the effective FMV using the remaining revenue and remaining usage quantity. 
• The updated FMV is applied only to future revenue periods.

This enhancement improves allocation accuracy and prevents unnecessary redistribution of fully recognized revenue.

Allocation Schedule Visibility

Users can review allocation details directly within the allocation dialog.

Available information includes:

• Allocation summaries
• Allocation schedules
• Billing allocation impact
• Revenue allocation impact
• Remaining allocation balances

User Interface Enhancements

This release includes multiple UI/UX improvements for allocation management.

Resizable Allocation Tables

Users can:

• Resize allocation tables
• Drag and resize columns
• Expand allocation views for improved readability

These improvements simplify allocation review for large datasets and complex contracts.

Key Enhancements

Limitations

Consider the following limitations when using this feature:

• The feature requires CSP-level feature flag enablement.
• Fully recognized charges are not reallocated during contract amendments.
• Allocation behavior applies only to supported charge models.

Best Practices

Follow these recommendations when configuring FMV allocation:

• Enable FMV only for supported charge types.
• Validate minimum commitment configurations before contract activation.
• Review allocation summaries before approving contract changes.
• Use allocation preview dialogs to validate billing and revenue impact.
• Verify partially recognized charges before reallocation processing.
• When using Wallet of Units with FMV allocation, verify that prepaid unit buckets are configured correctly before activating the contract.
• When expected usage quantities change after revenue recognition has begun, review the updated FMV allocation to understand how the remaining revenue will be recognized in future periods.