asc 606 webinar: the impact is on your whole organization
TRANSCRIPT
ASC-606 New Revenue Recognition Rules
Impact the entire company
This is BIG!!! Do you know why?!
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ASC-606 Caveats
Agenda
Introductions
ASC-606 Caveats
It is all about Revenue
New Opportunities
Taking Charge
Automation to assist in transition
Summary
ASC-606 Items to Call Out
May 28, 2014, FASB and IASB issued, ASC 606 and IFRS 15
Public companies - FY/CY 2018
Non-public companies - FY/CY 2019
Entities may elect either of two transition options:
Full Retrospective Method
Modified Retrospective Method
ASC-606 Greatly Expands the Scope of Disclosures
Contractual Cost Tracking/Matching:
ASC-606: Revenue is King
ASC-606 will affect all companies to some degree
Revenue Recognition is a key metric
Revenue is the bases for many business decisions
Areas of Changes in ASC-606 Elimination of software
guidance
No VSOE Limitation
Residual Approach
Contingencies
Roadmaps
Ratable revenue may
change
Vendor protection clauses
Time value of money
Extended payment terms
Certain Subscriptions
Cash Cap guidance
Funded R&D
arrangements
Distributor revenues
Contract modifications
Bill and hold
arrangements
Term licenses
Sales Commissions
Other contract costs
Volume Discounts
Extended warranties
Judgement & Estimates
ASC-606 Beyond Accounting Change ASC-606’s pervasive changes will be across the company:
Key Financial Metrics
Management/ Sales Compensation
Debt Covenants
Tax Payments
Investor Relations
IT Systems/ Processes/ Controls
ASC-606 Creates Opportunities
Business models, now have a fresh look
Business Practices
Contract Terms
Go-to-Market Strategies
Sales Compensation
Tax Matters
ASC-606 If You Have Not Started, You Are Late
Per PWC
Public Companies - 8%, not started, 75% assessing, 8% implementing
Private Companies – 47% not started, 45% assessing, 7% implementing
http://www.pwc.com/us/en/audit-assurance-services/accounting-
advisory/revenue-recognition-survey.html
For Full Retrospective method, the transition has begun
For Modified Retrospective method, data gathering has begun
Transition to ASC-606 timeline: 6 to 9 months, depending
3 to 6 months to assess and implement
3 months to run in parallel
ASC-606 Here is What You Can Do!!
Starting today, make ASC-606 Top Priority,
TAKE CHARGE!!
Practically/Actively what to do: “12 steps program”
“Accept the Old Methods are not Compliant”
Get Priority from the Very Top
Select a Cross-Functional Team
Educate the Team
Team Assesses the Situation/Sets Roadmap
Design & Implement: new Policies, Process and Systems
Next Steps
Don’t underestimate the potential impact or level of effort required
Complete your assessment soon
Consider the pros and cons of each adoption method and plan for
SAB 74 disclosures
Develop a detailed plan for implementation
Addressing These Challenges
Addressing These Challenges
Tools Focus in Automation
There are multiple automation tools in the market and these are
Stand alone tools that consume data from your transactional systems
Build on rules that you configure to
Manage revenue contracts (RC)
Identify configurable performance obligations (PoB)
Determine in arriving at transaction price (TP)
Allocate transaction price to separate performance obligations
Manage events or triggers to release revenue
Manage operational, accounting and disclosure reporting
There are multiple automation tools in the market
from Leeyo
Revenue Management Cloud Service (RMCS) from Oracle
from RevStream Inc.
from RevSym
Advanced Revenue Management from NetSuite
Excel !!!
Revenue Management Cloud
Tools in the Market
Transaction Lifecycle In Revpro – ASC 606
Transaction Grouping
Assign POB Templates
Calculate Variable
Consideration SSP Assignment
Create/Modify Revenue Contract
Revenue Release
Accounting Reporting
Calculate Other Costs
Forecasting
Bundle Explosion
No
Bundle Config Exists? Yes
Revenue Allocation
Contracts Orders Projects Billing Revenue Events
Identify Customer
Contract
(Step 1)
Identify
Performance
Obligations
(Step 2)
Determine
Transaction
Price (Step 3)
Allocate
Transaction
Price (Step 4)
Recognize
Revenue
(Step 5)
Post and
Report
GAAP Guidance
RevPro - Main Menu
RevPro - Main Menu
RMCS - Revenue Management Cloud Service
RMCS – Co-existence
RMCS – Functionality and Configurations
Source system Product Sale Service Sale Define Common Revenue Configuration
Contract
Idenfication in
FRM
Grouping
identifier
So#/PO#
Specific Time
periodManage Contract Identification Rules
Performance
Obligations
Identification
Explicit Goods
/ Services/
Combo
Implied based
on template.Manage POB Idenfication Rules,POB Templates
Performance
Obligations
Satisfaction
Point in time Point over
time
Group by Legal Entity &
Currency
Satisfied using
Events.Manage Performance Satisfaction Plans
Performance Obligation
Measurement
Quantity
based
Percentage
Based
Measure
Period
satisfied
Satisfaction Measurement Model in Implied Template
Standalone
Selling Price
(SSP)
Create SSP Manage SSP Define Observed and Estimated Standalone Selling Prices
RMCS – Main Menu
Challenges with Revenue Recognition using Excel
Pros
Spreadsheets are blank slates
Easy to use
Cons
Not secure
Heavily dependent on the user
Manual and error prone
Limited in functionality
Summary
Critical considerations towards ASC-606
Are you currently working with spreadsheets?
What option is best for you to comply with the new guidance?
Have you analyzed your business processes?
Review your ERP/systems footprint
Analyze your current transactional sources and processes
Are you clear on the data sources to support compliance with the new
guidance
Trusted tools & methodologies
Automate your revenue recognition data collection activity
Process revenue recognition tasks with rules based engine
ASC-606 Jade Global
“We are Ready to Help Today!” Help You TAKE CHARGE!!
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