Preparing for ASC 606
•Download as PPTX, PDF•
1 like•713 views
The accounting standard for recognizing revenue is changing – is your organization prepared for ASC 606? The revenue recognition standard defines new rules on how companies recognize revenue from contracts with customers, representing substantial changes and a major transition. ASC 606 is an updated accounting standard issued by FASB and IASB that is intended to increase financial statement comparability across companies and reduce the complexity in revenue recognition. The guidelines cover processes starting with contracts and continues through pricing, quotes, orders, and ending with revenue recognition. Explore the top options available to prepare for the upcoming transition period by registering for our webinar with Seamus Moran from Oracle, Hari Mundhra and Gourav Rathi from Deloitte Consulting LLP, and Tom Buechler from eprentise. This panel discussion moderated by eprentise CEO Helene Abrams will provide an overview of the new standard, highlight the areas of significant changes to be ready for, and discuss the recommended approaches for your organization, all in a Q&A format.
Recommended
Recommended
More Related Content
What's hot
What's hot (20)
Similar to Preparing for ASC 606
Similar to Preparing for ASC 606 (20)
More from eprentise
More from eprentise (20)
Recently uploaded
Recently uploaded (20)
Preparing for ASC 606
- 1. Preparing for ASC 606
- 2. 2 Webinar Mechanics • Submit text questions. • Q&A addressed at the end of the session. Answers will be posted within two weeks on our new LinkedIn Group, EBS Answers: http://www.linkedin.com/groups/EBS- Answers-4683349/about • Everyone will receive an email with a link to view a recorded version of today’s session. • Polling questions will be presented during the session. If you want CPE credit for this webinar, you must answer all of the polling questions. ©2018 eprentise. All rights reserved.
- 3. 3 Learning Objectives After completion of this presentation you will be able to: Objective 1: Discover how ASC 606 will transform the way all companies recognize revenue, and how this will impact businesses using EBS. Objective 2: Define areas of concern with the adoption of ASC 606, and what your organization should know to minimize financial reporting risks. Objective 3: Examine the recommended approaches to satisfy ASC 606 performance tracking obligations and their impact, specifically for companies doing contract-based work in EBS. ©2018 eprentise. All rights reserved.
- 4. 4 Panelists Seamus Moran Senior Director - Oracle Financials Development, Oracle Hari Mundhra Sr. Manager, Technology - Oracle Cloud, Deloitte Consulting LLP Gourav Rathi Manager, Deloitte Consulting LLP Tom Buechler Product Development Manager, eprentise ©2018 eprentise. All rights reserved.
- 5. 5 Companies Need to Change Their Oracle® E-Business Suite Without Reimplementing eprentise Can… Consolidate Multiple EBS Instances Change Underlying Structures and Configurations Chart of Accounts, Other Flexfields Merge or Split Ledgers or Sets of Books, Operating Units, Legal Entities, Inventory Organizations Calendars, Currency, Costing Methods Asset Revaluation, Inventory Valuation Separate Data for a Divestiture …So Our Customers Can: Avoid a Reimplementation Reduce Operating Costs and Increase Efficiencies Adapt to Change Reduce Complexity and Control Risk Improve Business Continuity, Service Quality and Compliance Streamline Operations with Visibility to All Parts of the Business Establish Data Quality Standards and a Single Source of Truth Finished But Not Done® Presenter: Tom Buechler | Product Development Manager, eprentise 22+ years experience with Oracle EBS in SCM, Manufacturing and Cost Management in delivery and support roles 8+ years prior experience in Cost Accounting and financial reporting Multiple Oracle Project Manufacturing (PJM) projects Oracle User Group Presentations: Consigned Inventory Management and Demantra ©2018 eprentise. All rights reserved.
- 6. 6 Exclusive testing partner for Oracle Cloud business Ranked No.1 NA Systems Integrator Cloud applications ramp-up HCM Cloud application QA testing HCM Cloud Early Adopter Program Marquee HCM Cloud partner Ranked #1 Cloud Partner by Oracle Oracle’s first Global Cloud Elite Partner Awarded Global System Integrator of the Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 10 YEARS EXPERIENCE WORKING WITH ORACLE CLOUD APPLICATIONS Oracle ERP Cloud Release 13 co-development with Oracle 2016 #1 In referenceable Cloud clients #1 NA SaaS Partner of the Year Global Cloud Transformation Partner of the Year Global SaaS Partner of the Year Certified experience in over 30 Oracle specializations Over 120 Oracle HCM Cloud and 40 Oracle ERP Cloud clients 2017 Deloitte’s Oracle ERP Cloud Leadership Copyright © 2018 Deloitte Development LLC. All rights reserved.
- 7. 7 The Oracle Cloud offers complete SaaS application suites for ERP, HCM and CX, plus best-in-class database Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) from data centers throughout the Americas, Europe and Asia. For more information about Oracle (NYSE:ORCL), please visit us at oracle.com. Seamus Moran Public in London [Public Trainee] 25 years in international controllership in the Europe & the USA External Reporting at an NYSE Silicon Valley semiconductor corporation At Oracle since 1995 Accounting Domain for Development – monitors US GAAP, IFRS with product in mind Member of the IASB’s IT Company Committee during “convergence” and “revenue” projects Currently Strategist & Domain responsibility for Oracle Revenue Management Cloud Service Oracle Copyright © 2018 Oracle and/or its affiliates. All rights reserved.
- 8. 8 What is the Problem? ASC 606 Fast Facts Ties Revenue Recognition from Customers with the satisfaction of contractual performance obligations Released May 2014, amendments in 2015-2016 Aligns standard for US GAAP with IASB (IFRS15) Effective Jan 1, 2018 for public companies and Jan 1, 2019 for private companies (2017 early adoption permitted) Applies to all contracts with customers except: Lease contracts Insurance contracts Financial instruments Certain guarantees (other than product warranties) Certain nonmonetary exchanges ©2018 eprentise. All rights reserved.
- 9. 9 ASC 606 Basics Step 1 • Identify contract(s) with customer Step 2 • Identify performance obligations Step 3 • Determine transaction price Step 4 • Allocate transaction price to contract obligations Step 5 • Recognize revenue when (or as) performance obligation is satisfied ©2018 eprentise. All rights reserved.
- 10. 10 SCENARIOS / BUSINESS REQUIREMENTS Before embarking on a system journey, the following areas need careful consideration: • Use case scenario analysis • Data needs and uses • Business requirement document • Data dictionary DESIGN & IMPLEMENTATION At the final stage, an organization will look at the software solution and implement. Key stages are: • Fit gap analysis • System & process design • Configure and test ACCOUNTING ASSESSMENT As a foundation, Interpret the new rules and establish a policy direction: • Timeline to become compliant – FY starting after Dec 15, 2017 • Full retrospective vs. modified retrospective transition • Transactional level analysis vs. category level analysis • Policy election and development Implement 3 2 Prepare 1 Understand Deloitte’s Approach to Revenue TransformationHow Are Companies Addressing the Problem: Approach to Revenue Transformation Copyright © 2018 Deloitte Development LLC. All rights reserved.
- 11. 11 Brute Force Uses spreadsheets & estimates Based on analyses of differences between old and new principles Error prone and risky Post Trial Balance Application Analyses old rules data as posted to the General Ledger and tries to correct it Macro level During the close Calculator Takes aggregated data and executes algorithms on it Can be a good “quick fix” Doesn’t provide drill down Subledger Contract asset and contract liability sub-ledgers Accounting contract by transactions Drill down, et cetera (Oracle RMCS, PPM, and EBS PA, & Peoplesoft, JDE) What is the Impact of Each of the Different IT Approaches? Spectrum of IT Approaches to ASC 606 / IFRS 15 Copyright © 2018 Oracle and/or its affiliates. All rights reserved.
- 12. 12 Panelists Seamus Moran Oracle Gourav Rathi Deloitte Consulting LLP Hari Mundhra Deloitte Consulting LLP Tom Buechler eprentise ©2018 eprentise. All rights reserved.
- 13. 13 Adopting ASC 606 – Challenges and Complexities Major Challenges • Underestimation of the standard • New and unfamiliar guidance – judgements, estimates, disclosures etc. • Data & system challenges • Reporting Complexity Drivers • Organization size and industry • Current system landscape • Contract/order orchestration and complexity • Data sources and mapping Leading Practices • Understand, educate & plan • Assess & design • Manage change – finance, process, organization & systems • Develop operating model and future COE Copyright © 2018 Deloitte Development LLC. All rights reserved.
- 14. 14 Embrace the Standard Set your 606 / 15 Policy • Performance Obligations • Initial & Revenue Events • Stand Alone Pricing Finalize your GRC • Reconcile to Def. Rev. • Validate with CPA firm • Redo rules if required Post to Adoption Ledger • Work history to have enough Perf Obs to post your revenue in Quarter 1 Cut-over day • Supports opening balance sheet • Re-pointed to Corp. Ledger Go Live on ASC 606 or IFRS 15 with RMCS Set up Revenue Management • Data from Oracle • Data from elsewhere • Test & discard, do over These 4 Processes ADOPT 606/15 Establish your Governance, Risk Management & Internal Control (GRC) for ASC 606 or IFRS 15 New concepts New processes New data & sources These 5 Processes Set up RMCS Test Data Validate GRC Check Results Build up Opening Balances To Support Retrospective B.S. Find the relevant data in your IT Landscape • Review at inception • Promise Unit of Measure • Estimate & correct Copyright © 2018 Oracle and/or its affiliates. All rights reserved.
- 15. 15 Review At Inception Step 1: Contract ID # x Customer Facing Price (Transaction) Standalone SP Or ESP Basis for Alloc. Relativity Math Revenue & PO Value Discount (allocation) Nets to Zero OT PIT Devlvd Either Party Acts Revenue Recog- nized Bill Plan Step 2: Perf. Obligation 1 50 Step 4: 60 105% * 60 = 63 13 PIT Sign Delivery Each 30 days arrearsPerf. Obligation 2 55 40 105% * 40 = 42 (13) OT Day 1 Monthly Step 3: Transaction Price 105 Transaction Price = Expected Consideration = 105 0 Stand Alone Price & Relativity 100 105/100=105% relativity Values used for accounting: the liability, asset and revenueASC 606-10-25-14 | IFRS 15-22 Tabulation like this during adoption or with new orders, with more columns, helps to figure: • Your promises rather than just your product codes, understand “promises” versus “promise details” • Transaction attributes: PIT, OT, Devolved/Series. Add columns for Billing, Either Party Acts, Revenue Events • Which data you need to import and where it might be in your IT landscape • What the accounting will look like and what data needed to derive the account numbers • You’d like to see when contracts are modified or estimates revised Copyright © 2018 Oracle and/or its affiliates. All rights reserved.
- 16. 16 Overview of eprentise Reorganization Inventory Organizations Project Accounting and Project Manufacturing NOT ENABLED E-Business Suite – Current State Supply Chain and Manufacturing Modules Historical Data Open Transaction Data Setup new Project Accounting and Project Manufacturing ENABLED Inventory Organizations Repoint Old Inventory Organization Configurations (non-PJM) with New Inventory Organization Configurations (PJM) Enable Project/Task References on On-hand Inventory Balances Transformation Engine Enable Project/Task References on Open Transactions Contracts Projects Project Accounting and Project Manufacturing Enablement E-Business Suite – Future State Execution and Planning Discrete Work Orders, Flow Schedules Earned Value Analysis, Progress Billing, and Revenue Recognition as per Performance Obligations Collects Direct and Indirect Actual Costs Billing and Revenue Management Inventory Organizations Project Accounting and Project Manufacturing ENABLED Supply Chain and Manufacturing Modules Historical Data Open Transaction Data Feeds data to ©2018 eprentise. All rights reserved.
- 17. 17 Revenue Management Cloud Service ERP CLOUD ASC 606 and IFRS 15 Compliance Automation The Standard’s Five Steps to Revenue Third party and On Premise/ EBS Sales Cycle Data Cloud Service order, billing, & fulfillment data Revenue Management Cloud Service Cloud Service General Ledger EBS General Ledger Copyright © 2018 Oracle and/or its affiliates. All rights reserved.
- 18. 18 Illustrative Revenue Recognition Roadmap The following presents the types of activities that are expected to be required in the implementation of the revenue recognition standard requirements: Deloitte is one-stop shop for your overall solution Copyright © 2018 Deloitte Development LLC. All rights reserved.
- 19. 19 Accelerate Revenue Transformation with Deloitte’s RevenuePrintTM Our world class implementation methodology for Oracle Cloud combined with Revenue Print helps accelerate the implementation. Enterprise Value Delivery for Oracle Cloud What RevenuePrint Offers • A Preconfigured Oracle Cloud Revenue Management solution • End-to-end solution architecture covering complex scenarios • List of major functional components required to implement Revenue Recognition solution • Identified repository of reports enabling organizations to be revenue compliant quickly and efficiently Technology accelerators • Prior implementation accelerators, including repository of accounting scenarios for multiple industries • Identified list of data elements required to support ASC606 • Conversion of accounting scenario documentation into business requirements and comprehensive data dictionary Accounting & Business accelerators Quick compliance Dual reporting Reduced time to implement Benefits Efficient scenario development Copyright © 2018 Deloitte Development LLC. All rights reserved.
- 20. 20 Deployment Strategy and Rollout Options Evaluating the risks and tradeoffs that will be encountered with the various deployment strategies BIG BANG GEOGRAPHIC ROLLOUT FUNCTIONAL/PROCESS ORGANIZATIONAL Risks • High risk • Operational disruptions • Cost to implement • Agility in hyper-care support • Maintenance of dual processes • Ability to get in front of disruptive technologies Trade-offs • Agility for process improvement • Slower realization in global value • Slower realization in end-to- end value stream • Lack of focus • Slower realization in global & end-to-end value stream • Higher cost Benefits • Lower cost of execution & support • Connected value stream • Speed • Low risk • Geographical functional agility • Regional alignment • Steady performance • Low risk • Core functionality enables future capability • Low risk • Targeted operational impacts Examples • Leading semiconductor company • Fast-growing life sciences company • Large insurance provider • Large distribution company • Large electric utilities company • E-commerce company • Global auto manufacturer • Large chemical distribution company TYPICAL DEPLOYMENT STRATEGIES Deploy full functionality in all locations simultaneously Deploy full functionality by region with similar scope and size go-lives Deploy core functionality for all locations, then deploy other functionality in successive waves Deploy core functionality for all locations in one organizational unit Copyright © 2018 Deloitte Development LLC. All rights reserved.
- 21. 21 Panelists Seamus Moran Oracle Gourav Rathi Deloitte Consulting LLP Hari Mundhra Deloitte Consulting LLP Tom Buechler eprentise ©2018 eprentise. All rights reserved.
- 22. 22 Opening Balance Sheet 1. Deferred Revenue Accounting (Old Rules) End of Year: 2013 2014 Balance Sheet / Profit & Loss B.S. P&L B.S. P&L AR or Cash $4M_ $4M_ Deferred Revenue Liability <$4M> $0M_ Contract Liability Equity <$0M> <$4M> Revenue $0M_ $4M_ Sum of both years revenue $4M_ 2. Performance Obligation (New Rules) End of Year: 2013 2014 Balance Sheet / Profit & Loss B.S. P&L B.S. P&L AR or Cash $4M_ $4M_ Deferred Revenue Liability Contract Liability <$1M> $0M_ Equity <$3M> <$4M> Revenue $3M_ $1M_ Sum of both years revenue $4M_ 3. Transition Rules (Both Old and New Rules) End of Year: 2013 (old) Rev ‘13 B.S. 2014 (new) Balance Sheet / Profit & Loss B.S. P&L B.S. P&L AR or Cash $4M_ $4M_ $4M_ Deferred Revenue Liability <$4M> $0M_ Contract Liability <$1M> <$0M> Equity <$0M> <$3M> <$4M> Revenue $0M_ $1M_ Sum of both years revenue $1M_ Old Rules: Deferred $4M of software in year -1 Recognized $4M the year +1 New Rules: Recognized $3M of software in year -1 Recognized $1M the year +1 Transition Rules • Deferred $4M of software year before adoption • Recognized $1M the year after adoption • Remaining $3M to equity Transition Impact • $3M Deferred Revenue replaced by • $1M Performance Obligation Liability Copyright © 2018 Oracle and/or its affiliates. All rights reserved.
- 23. 23 Panelists Seamus Moran Oracle Gourav Rathi Deloitte Consulting LLP Hari Mundhra Deloitte Consulting LLP Tom Buechler eprentise ©2018 eprentise. All rights reserved.
- 24. 24 Thank You! Questions and responses will be posted on EBS Answers: http://www.linkedin.com/groups/EBS-Answers-4683349/about Seamus Moran Oracle seamus.moran@oracle.com www.oracle.com Gourav Rathi Deloitte Consulting LLP gorathi@deloitte.com www.deloitte.com Hari Mundhra Deloitte Consulting LLP hamundhra@deloitte.com www.deloitte.com Tom Buechler eprentise tbuechler@eprentise.com www.eprentise.com ©2018 eprentise. All rights reserved.
- 25. 25 © 2018 eprentise, LLC. All rights reserved. eprentise® is a registered trademark of eprentise, LLC. Oracle, Oracle Applications, and E-Business Suite are registered trademarks of Oracle Corporation. As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting. All other company or product names are used for identification only and may be trademarks of their respective owners.
Editor's Notes
- [Countdown 15, 10, 5, 2 min] Thank you for joining today’s webinar. We will begin the presentation in X minutes.]. You will notice a poll question currently on your screen. If you would like to receive CPE credit for today’s web event, please respond to this poll question. More details will be available at the start of the presentation. [RECORD] Thank you for joining today’s presentation entitled, “Preparing for ASC 606.” This is an exclusive panel hosted by eprentise that will also feature experts from Oracle and Deloitte. We are really excited for this event, and because of the format of the panel, we are kicking off the presentation with the first of our polling questions, which you’ll currently notice on the screen. We will be offering CPE credits for today’s webinar, and as such, we will be presenting polling questions throughout the session, starting with this one. I’ll be wrapping up this poll shortly, so please get your answers in, and let me know if you are having any technical details. For anyone who hasn’t joined us before, please note that when we make a poll available, you will simply click on your preferred answer and click Submit. If you would like to receive CPE credit for today’s webinar, you must respond to all our polling questions. The CPE certificate will be emailed to you within 1 week. I will now close the poll, and will give back presenter controls so that I can go into a few housekeeping items on slide 3 to let you know how you can participate in today’s web event.
- On this slide, we’re looking at an example of the Webex Attendee Interface. We are currently sharing this presentation with you in full-screen mode, so you should notice a Viewing toolbar displayed at the top of your screen. From that toolbar, you have access to resources like the Chat pane, which you can use to send us messages for any issues you are having or to share any comments you’d like to make with me as your moderator. There is also a Questions pane, which is where I will ask you to send questions related to the presentation content itself and that will be addressed by our speakers. To ask a question, simply click on the Q&A button in your viewing toolbar, type in your question and click send. Please make sure to send any message from the chat pane and especially any questions in the Q&A pane to all hosts and panelists so that we can ensure it is received and answered. If you send it to only one person, it may not be seen. Although we will not have time for live Q&A today, we will make sure to address your questions after the webinar. Due to the format of today’s panel, we will post all of the questions from our moderator and answers from our panelists on the LinkedIn group, EBS Answers, within 2 weeks. A lot of you are members already, but if you haven’t joined this interactive group yet, we invite you to do so to see the Q&A, ask follow up questions or even provide your own answers, comments or discussions. The link to that group page was in your webinar invitation email and will also be included in your follow up email. As a final reminder, today’s Webinar is being recorded, and everyone will receive an email with a link to view a recording of today’s event.
- Finally, let’s get into the learning objectives. [Read Objectives] Now, to begin today’s panel, I’d like to welcome our moderator, eprentise CEO Helene Abrams. Helene was Oracle’s first apps consultant in 1988, and founded our company eprentise, which she incorporated in 2007. She has prepared questions for our panelists that will address the above learning objectives, and will help us all better prepare for ASC 606. Our panelists have prepared responses and content in relation to those questions. Helene, I’ll now turn the floor over to you.
- 1 minute Gourav Intro, Hari Intro Hari Slide Speaker