revenue recognition: sales order management, contract · –sales order invoices –contract...

Copyright © 2016, Oracle and/or its affiliates. All rights reserved. |

Revenue Recognition: Sales Order Management, Contract and Service Billing Changes Are Coming [CON6802]

Robert Monahan, VP Product Management David Scott, Senior Principal Product Manager JD Edwards September 19, 2016


Safe Harbor Statement

The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.

3


Program Agenda

Business problem

Solution

Invoicing Enhancements

Contract and Service Billing and Project Costing Enhancements

Capabilities – Current and Planned

Summary

1

2

3

6

5

4

4


Program Agenda

Business problem

Solution




Summary

1

2

3

6

5

4

5


Business Problem

• Currently revenue recognized when invoice is posted to G/L

• Business processes and industry standards require the recognition ofrevenue separate from the invoice process

• New Revenue Recognition Standard to be in effect in January 2018– Convergence of IFRS and US GAAP revenue recognition standards

– Common standard from the International Accounting Standards Board (IASB) and theFinancial Accounting Standards Board (FASB)

– Replaces all existing revenue recognition standards

– All industries and countries• Exceptions are the Insurance and Lease Vendor industries

6


Revenue Recognition Accounting Standard – High Level

The core principle as stated from IFRS is to

“Recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled

to exchange for those goods or services.”

1. Identify the contract(s) with the customer 2. Identify the separate performance obligations 3. Determine the transaction price 4. Allocate the transaction price 5. Recognize revenue when a performance obligation is satisfied

7


It Comes Down To:

8

Actual Revenue Performance Liability Account

Performance Obligation X Performance Obligation


Over the Counter Sales Use Case

• Goods or services are received

• Payment made at the point of sale

• Transactions finalized in ERP system

9



Customer purchases widgets at a retail store

Customer takes possession of the widgets and pays for them at the store

July 3

Performance Obligation Satisfied

10





Invoice created for transaction

July 3


11






Revenue and COGS amounts booked

July 3


Revenue and COGS

Recognized

12







Payment created for transaction

July 3


Revenue and COGS

Recognized

13







Payment created for transaction

July 3

No Changes Required to Current Business Process or

Accounting Entries


Revenue and COGS

Recognized

14


Shipping of Goods to Customer Use Case

• Sales Order for goods that will be shipped a longdistance to the customer

• Customer is invoiced at the time of shipment

• Customer takes advantage of the discounts availableand pays prior to receiving the shipment

15



Agreement made between supplier and

customer for the sale of widgets

July

16





Sales Order Created

July August

17





Sales Order Created

Widgets Shipped to Customer

July August

18





Sales Order Created


Invoice created

July August

19

Current Process -Revenue and COGS

Recognized

New Standard Performance Liability for

Revenue and COGS





Sales Order Created


Invoice created

Customer pays the invoice

July August

Current Process - Revenue and COGS

Recognized


Revenue and COGS

20





Sales Order Created


Invoice created


Supplier receives payment

July August

21


Recognized


Revenue and COGS





Sales Order Created


Invoice created



Customer receives widgets and notifies supplier they have

accepted them

July August September Performance

Obligation Satisfied

22

Current Process -Revenue and COGS

Recognized


Revenue and COGS





Sales Order Created


Invoice created



Customer receives widgets and notifies supplier they have

accepted them

Performance Liability is cleared and the Revenue and COGS amounts are

booked

July August September

New Standard Revenue and

COGS Recognized

23


Recognized


Revenue and COGS



What should I do next?

• Talk with your internal financial team/auditors/advisors

•Review periodicals to stay current

•Analyze your company's revenue related transactions against new standards

• Learn how the JDE software enhancements will enable this change

24


Program Agenda

Business problem

Solution




Summary

1

2

3

6

5

4

25


JD Edwards Revenue Recognition Solution

• Software changes are required!

• Updates available and planned

–EnterpriseOne 9.1, 9.2

–World A93.1 and A94

• Key challenges for revenue managers

– Identify customer contracts

– Identify the separate performance obligations

–Determine the transaction price

–Allocate the transaction price

–Recognize revenue when a performance obligation is satisfied (Our focus)

26


Program Agenda

Business problem

Solution




Summary

1

2

3

6

5

4

27


Revenue Recognition Process Key Features

• Configure which invoices will go through the Revenue Recognition Process – A/R Invoices

– Sales Order Invoices

– Contract Billing Invoices

– Service Billing Invoices

• Performance Liability Accounting entries at invoice creation

• Recognize Revenue and Cost of Goods Sold separate from invoicing

• Reconciliation, Integrity Checking, and Audit of Revenue Recognition data

28


Manage Invoices in Revenue Recognition Process

29

• Batch process to automaticallyrecognize revenue and COGS(based on a date)

• Workbench–Manage by exception– Review invoices in revenue

recognition process–Manually recognize actual revenue

and COGS (partially or in full)


Program Agenda

Business problem

Solution




Summary

1

2

3

6

5

4

30


• Configure invoice-only transactions for revenue recognition (using triggers)• Summarize Unit Price and Lump Sum billing transactions by subledger• Allow adjustments for Stored Material for Lump Sum invoices• Reporting changes

• Ability to pass G/L Date from R48131 (invoice generation) to R48132 (revenuegeneration)

• Detailed revenue recognition posting report

Contract and Service Billing Key Features

31


• Identify multiple performance obligations within a single job• Run Profit Recognition process by performance obligation• Make adjustments by performance obligation

Job Cost Key Features

32


Project Costing

Job 1 – Executive Building Phase I - Excavation

Tower 1 excavation Tower 2 excavation

Phase II - Foundation Tower 1 foundation Tower 2 foundation

Phase III - Framing Tower 1 framing Tower 2 framing

% Complete Revenue Cost

RPO 1: Tower 1 % Complete Revenue Cost

RPO 2: Tower 2 % Complete Revenue Cost

Multiple performance obligations in a single job Revenue Performance Obligations (RPO): Tower 1 & Tower 2

One performance obligation for each job Performance Obligation: Executive Building

Job 1 – Executive Building Phase I - Excavation

Tower 1 excavation – RPO 1 Tower 2 excavation – RPO 2

Phase II - Foundation Tower 1 foundation – RPO 1 Tower 2 foundation – RPO 2

Phase III - Framing Tower 1 framing – RPO 1 Tower 2 framing – RPO 2

33


Program Agenda

Business problem

Solution




Summary

1

2

3

6

5

4

34


Current (generally available) • Configuration to include or exclude invoices• Evaluation of configuration at all invoice entry

points• Recognize all, less, more, or none of the

revenue and/or COGS amounts• Remove an invoice from the process• Reverse a previous recognition• Batch and interactive process to add existing

invoices to process• Integrity checking and reconciliation of

Revenue Recognition Data

Planned • Audit Processes

Invoicing Process Enhancements


Current (generally available)

• Configure invoice-only transactions for revenue recognition (using triggers)

• Ability to summarize Unit Price and Lump Sum contract billing transactions by subledger

• Ability to make adjustments for Stored Material for Lump Sum invoices

• Reporting changes – Ability to pass G/L Date from R48131 to R48132 – Detailed revenue recognition posting report

• Identify multiple performance obligations within a single project/job – Profit Recognition process by performance obligation – Adjustments by performance obligation

Planned

• Transition to new standard: Allow Profit Rec to run at a different level for jobs

• Calculate Project Final amounts (HA/HU Ledgers) and run Profit Rec by subledger

• Change requests for T&M and Fee billing lines • Track contract amounts related to change orders • Performance Liability Account amounts visible in

Contract Status Inquiry application

Contract and Service Billing/Project Costing Enhancements

36


Program Agenda

Business problem

Solution




Summary

1

2

3

6

5

4

37


Summary

• These enhancements allow our customers to: –Comply with Revenue Recognition Accounting Standards and Business

Processes

–Minimize the impact on current business processes

–Minimize the impact on current users

–Utilize additional flexibility for our Contract and Service Billing and Project Costing modules

38


Additional Information

• learnjde.com– Frequently Asked Questions

– JD Edwards Implementation Guides

– Tutorials

• Financial Accounting Standards Board (FASB) - link

• International Accounting Standards Board (IASB) – link

39

learnjde.com

http://www.fasb.org/home

http://www.ifrs.org/

revenue recognition: sales order management, contract · –sales order invoices –contract...

Documents