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FASB/IASB for JD Edwards

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FASB/IASB for JD Edwards

  1. 1. Page 1 Confidential & Proprietary FASB/IASB for JD Edwards – What to Expect Presenter: Yogesh Godbole Principal Consultant, Finance Circular Edge +1-732-915-7610 yogesh.godbole@circularedge.com
  2. 2. Page 2 Confidential & Proprietary Circular Edge: Redefining Impossible Third Party Solutions All out Security Essentio Everest Reports Now Cognos RFSmart DSI Optio Create Form Boomerang Packaged Solutions SmartScheduler AutoXCHNG SmartHelp Managed Services Level 1, 2 and/or 3 Support 24x7 Phone and monitoring services Oracle Solutions Oracle Sales Cloud Oracle Marketing Cloud Oracle HCM Cloud Value Chain Planning Oracle Database Fusion Middleware BI Publisher Oracle BI Cloud EPM/Hyperion OBI EE Hybrid Managed Cloud On Premise Private Cloud Public Cloud Platform Hosting IaaS/PaaS/SaaS Production/Sandboxes Consulting Implementations Upgrades Rollouts Production Support Custom Dev Training Accelerator CNC Templates Integrations
  3. 3. Page 3 Confidential & Proprietary Employee Customer Global Commitment Industry • 150+ Employees • 95% Direct staffing • Continuous training • Oracle specialized • Team oriented • Experienced • 27 + Countries • $20M - $5B • Repeat Projects • Focus on Satisfaction • Offices across USA • Offices in UAE • Offsite teams in Chennai, Mumbai and Dubai • Localizations experience • Global experience • 2003 • Oracle Partner • QUEST Sponsor • Specialized Team • Real Estate • Life Sciences • Manufacturing • Retail • Distribution
  4. 4. Page 4 Confidential & Proprietary Agenda 1. What are FASB & IASB? 2. Relevance of IFRS and US GAAP in US Market 3. New Accounting Standard on Revenue Recognition 4. Deadline to adopt to changes in Revenue Recognition 5. Main Provisions under Revenue Recognition 6. JDE EnterpriseOne 9.2 Solution 7. Benefits of the Revenue Recognition process
  5. 5. Page 5 Confidential & Proprietary What are FASB & IASB?
  6. 6. Page 6 Confidential & Proprietary •In USA, Financial Accounting Standards Board (FASB) issues different guidelines called as “US GAAP” (US Generally Accepted Accounting Principles) between 1973-2009 •The International Accounting Standards Board (IASB) is an independent, private-sector body that develops and approves International Financial Reporting Standards (IFRS). •The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S. What are FASB & IASB?
  7. 7. Page 7 Confidential & Proprietary Relevance of IFRS and US GAAP in US Market
  8. 8. Page 8 Confidential & Proprietary •Under SEC regulations, domestic US companies need to file financial statements under US GAAP issued by FASB •US Domestic Companies cannot use IFRS standards •SEC permits its foreign private issuers to use IFRS issued by IASB for filing of annual reports •Unlisted private companies can use IFRS or IFRS for SMEs issued by IASB •In some cases this requires multi GAAP reporting Relevance of IFRS and US GAAP in US Market •Under Norwalk Agreement between FASB and IASB, US is committed to convergence of US GAAP and IFRS standards
  9. 9. Page 9 Confidential & Proprietary New Accounting Standard on Revenue Recognition
  10. 10. Page 10 Confidential & Proprietary •FASB and IASB initiated a joint project to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and IFRS that would: • Remove inconsistencies and weaknesses in revenue requirements. • Provide a more robust framework for addressing revenue issues. • Improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets •In May 2014, new common standard was issued as • US GAAP Topic 606 (ASC 606) - Revenue from Contracts with Customers (issued by FASB) • IFRS 15 - Revenue from Contracts with Customers (issued by IASB) New Accounting Standard on Revenue Recognition
  11. 11. Page 11 Confidential & Proprietary Deadline to adopt to changes in Revenue Recognition
  12. 12. Page 12 Confidential & Proprietary •FASB Update 2015-14: 1 year deferment for applicability of new standard on revenue Recognition •New effective date 12/15/2017: For Public business entities, certain not- for-profit entities, and Certain employee benefit plans in US (early adoption permitted for annual reporting period starting 12/15/2016 including interim reporting) •New effective date 12/15/2018: For all other entities in US (early adoption permitted for annual reporting period starting 12/15/2016. Interim reporting can be done as per new standard effective from 12/15/2016 or one year after annual reporting first under new standard) Deadline to adopt to changes in Revenue Recognition
  13. 13. Page 13 Confidential & Proprietary Main Provisions under Revenue Recognition Standard
  14. 14. Page 14 Confidential & Proprietary Main Provisions under Revenue Recognition • The core principle as stated in the 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.” • Here are the basic steps outlined related to this new standard: • The guidance in this Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts).
  15. 15. Page 15 Confidential & Proprietary Main Provisions under Revenue Recognition •The new standard states that you cannot recognize revenue for billed revenue amounts associated with the billing amount until the performance obligation to the customer is satisfied. •For each performance obligation, an entity must apply consistent method of measuring the progress •Performance obligation is satisfied at a point in time or over time. This is the trigger to recognize the revenue. •Recognize Costs to obtain or fulfill the contract •Under disclosure requirements, qualitative and quantitative information is required about contracts, changes, transaction price, costs, etc.
  16. 16. Page 16 Confidential & Proprietary Example: Over the Counter Sales Assumptions: • Goods or services are received at a point • Payment made at the point of sale • Transactions finalized in ERP system immediately
  17. 17. Page 17 Confidential & Proprietary Example: Over the Counter Sales Customer purchases auto-parts at a retail store Customer takes possession of the goods and pays for them at the store Invoice created for transaction Revenue and COGS amounts booked Payment created for transaction January 5 No Changes Required to Current Business Process or Accounting Entries Performance Obligation Satisfied Revenue and COGS Recognized
  18. 18. Page 18 Confidential & Proprietary Example: Shipping of Goods to Customer Assumptions: • Sales Order for goods that will be shipped a long distance to the customer • Customer is invoiced at the time of shipment • Customer takes advantage of the discounts available and pays prior to receiving the shipment
  19. 19. Page 19 Confidential & Proprietary Example: Shipping of Goods to Customer Agreement made between supplier and customer for the sale of auto- parts Sales Order Created Auto-parts Shipped to Customer Invoice created Custo mer pays the invoic e Supplier receives payment Customer receives auto- parts and notifies supplier they have accepted them Performance Liability is cleared and the Revenue and COGS amounts are booked February March April Performance Obligation Satisfied New Standard Revenue and COGS Recognized Current Process Revenue and COGS Recognized New Standard Performance Liability for Revenue and COGS
  20. 20. Page 20 Confidential & Proprietary JDE EnterpriseOne 9.2 Solution
  21. 21. Page 21 Confidential & Proprietary Invoice Entered Invoice sent to RR process Performance Liability booked in GL Performance Obligation Complete Revenue and COGS Recognized Source of Invoice • A/R • Sales Order • Contract Billing • Service Billing Invoices are sent to the Revenue Recognition process based on trigger processing AAI/DMAAIs determine the Performance Liability account Determined by Customer’s business process Performance Liabilities cleared from G/L Revenue booked in G/L COGS booked in G/L Revenue Recognition Process Flow
  22. 22. Page 22 Confidential & Proprietary Example: Shipping of Goods to Customer Agreement made between supplier and customer for the sale of auto-parts Sales Order Created Auto-parts Shipped to Customer Invoice created Customer pays the invoice Supplier receives payment Customer receives auto-parts and notifies supplier they have accepted them Performance Liability is cleared and the Revenue and COGS amounts are booked February March April Performance Obligation Satisfied New Standard Revenue and COGS Recognized New Standard Performance Liability for Revenue and COGS - Revenue Performance Liability COGS Performance Liability Cost of Goods Sold $200.00 $175.00 $200.00 $200.00 $175.00 $175.00
  23. 23. Page 23 Confidential & Proprietary Revenue Recognition Set Up 1. System Setup: • Setting Up the Revenue Recognition Constant • Set up new OBJ.SUB accounts in COA for Revenue Recognition Process • RP AAI: To determine the Performance Liability Account (PLA) • DMAAI 4225 Setup: Cost of Goods Sold PLA • RQ AAI Setup: COGS PLA Adjustment Account • UDC 03B/SR: Current revenue recognition status of an invoice pay item 2. Trigger Setup • Revenue Recognition Trigger Setup for A/R Invoices • Revenue Recognition Trigger Setup for Sales Orders • Revenue Recognition Trigger Setup for Contract Billing • Revenue Recognition Trigger Setup for Service Billing
  24. 24. Page 24 Confidential & Proprietary Revenue Recognition Trigger Setup • Triggers the system uses to determine whether to send an A/R invoice to the revenue recognition process • You must define all three triggers (Hierarchy, Date and Configuration records) for each required system • There are separate trigger configurations for:  A/R invoices  Sales Order invoices  Contract Billing invoices  Service Billing invoices
  25. 25. Page 25 Confidential & Proprietary • Use the Revenue Recognition program (P03B116) to recognize revenue for an individual invoice, for multiple invoices, or by batch. You can recognize more, less, or all of the COGS for a sales order invoice. • Optionally, to automatically recognize revenue and COGS for invoices, you can use the Revenue Recognition - Blind report (R03B116). Recognizing Revenue & COGS at Performance Obligation Completion
  26. 26. Page 26 Confidential & Proprietary Revenue Performance Obligations (RPO) in Job Cost • Setup RPO AAIs to define Cost and Revenue Accounts • Define Revenue Performance Obligation Master (P5202) for a Job • Record the progress of the job – Update % Complete at RPO level • Profit Recognition Build (R51800) for RPO • Create Profit Recognition Journal Entries for RPO (R51444)
  27. 27. Page 27 Confidential & Proprietary Benefits of new Revenue Recognition features in EnterpriseOne: • Comply with Revenue Recognition Accounting Standards ‐ Identify and track your contracts and Performance Obligation ‐ Recognize revenue only when the performance obligation is complete ‐ Accurately reflect the performance liability and revenue in your Balance sheet and Income statement • Minimize impact to current business processes ‐ The system determines which invoices need to go to Revenue Recognition process versus the staff • Flexible Set Up ‐ Choose which companies use the functionality based upon your business needs ‐ Flexibility to identify those invoices that need to go to the RR process based upon your company’s business process
  28. 28. Page 28 Confidential & Proprietary Thank you! Follow Circular Edge for Additional FASB/IASB Resources www.circularedge.com @circular_edge https://www.linkedin.com/company/circular-edge

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