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

Contents

• Overview
• Supported Charge Types
• How FMV Allocation Works
• 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

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:

1. The system evaluates all eligible charges within the contract.
2. Supported charges are included in the revenue allocation process.
3. Revenue allocation schedules are generated based on eligible charges and FMV values.

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.

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

The updated algorithm excludes fully recognized charges from reallocation calculations.

Only:

• Partially recognized charges
• Unrecognized charges

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.