This document provides an overview of the new revenue recognition standards ASC 606 and IFRS 15. It summarizes the 5 steps to comply with the standards: 1) identify contracts with customers, 2) identify performance obligations, 3) determine transaction price, 4) allocate price to obligations, and 5) recognize revenue upon satisfaction. It then discusses options for complying with the standards in Dynamics GP, including using Excel or a third party application to perform the required calculations and revenue allocation.

2.  30+ years progressive Business, Project and IT
Management, formal management and financial
training, technical and industry certifications
 Project management and technical leadership in
the delivery of IT and ERP implementations
 Resolution and consulting skills in applying best
practices and efficiency initiatives
Career History:
Solutions Consultant 2011 – Present
Dynamics GP Consultant 2007 – 2011
Mgr. IT and Process Improvements 1993 – 2007
Education:
• CPA (CertifiedProfessionalAccountant)
• CMA (CertifiedManagementAccountant)1994-
Present
• PMP (Project ManagementProfessional)
• MCSE (Microsoft CertifiedSystemEngineer)
• MCBMSP (Microsoft CertifiedBusiness
ManagementSolutionsProfessional)
NEIL MACDONALD CPA, CMA, PMP

3. OBJECTIVES – OR WHY ARE WE HERE?
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4. SESSION AGENDA
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• There’s the hard way!
• And the easy way!
• Software demo
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6. • FASB 2014-09 and IFRS 15
• Updated accounting standards to ensure revenue recognition was consistent across
industries, geographies, capital markets
• Applies to virtually all sectors where there are “contracts with customers” (exceptions include
leases, insurance and banking)
• Reduces number of requirements and expands disclosure
• Replaces EITF 08-1 / ASC 2009-13; EITF 09-3 / ASC 2014-09; SOP 97-2
• Removes reliance on VSOE, TPE, BESP, residual method, although elements of these still exist
• Adds new revenue recognition elements
• “Performance Obligations” rather than deliverables
• Requires “Distinct” identification of Performance Obligations
• Adds “Variable Consideration”
• Adds “Time Value of Money” for certain contracts
• Recognition depends on “transfer of control”

7. ASC 606 – Revenue From Contracts with
Customers
Today’s standards are RULES
based
New standard is PRINCIPLES
based
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8. 2. Identify Performance Obligations
1. Identify contracts with customers
3. Determine Transaction Prices
4. Allocate Revenue Based on SSP’s
5. Recognize Revenue Upon Satisfaction
ASC 606 – SUMMARY OF 5 STEPS

9. 1. Identify the
Contract

12. 2. Identify the
Performance
Obligations
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14. 3. Determine the
Transaction Price

17. 4. Allocate the
Transaction Price
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18. 4. ALLOCATE THE TRANSACTION PRICE

19. • SSP Computer $ 700
• SSP Monitor 300
• SSP Keyboard/mouse 100
• SSP Service Contract (deferred) 100
• Total value $1,200
Calculated as (Item SSP / Sum of all SSP) * Selling Price
• Computer $700/$1,200 * $1,000 = $583.34
• Monitor $300/$1,200 * $1,000 = $250.00
• Keyboard/mouse $100/$1,200 * $1,000 = $ 83.33
• Service Contract $100/$1,200 * $1,000 = $ 83.33
ALLOCATION OF PRICE WITH MULTIPLE PERFORMANCE OBLIGATIONS
NOTE: If these are not “distinct
performance obligations” in the
contract, i.e. you sell a “system”,
the entire amount may need to be
deferred!!!

20. 21
5. Recognize
Revenue upon
Satisfaction

21. 5. RECOGNIZE REVENUE UPON SATISFACTION

22. 5. RECOGNIZE REVENUE UPON SATISFACTION CONT’D

23. 2. Identify Performance Obligations
1. Identify contracts with customers
3. Determine Transaction Prices
4. Allocate Revenue Based on SSP’s
5. Recognize Revenue Upon Satisfaction
ASC 606 – SUMMARY OF 5 STEPS

25. TIMING
Effective for fiscal periods beginning after December 15, 2017 for public companies
and NFP
Effective for fiscal periods beginning after December 15, 2018 for private
companies
Everyone can early adopt as of fiscal periods beginning after December 15, 2016

26. SELLING “SOLUTIONS” VS PRODUCTS
Beware of items that are not “distinct” in terms of the contract and the associated
revenue.
Items sold as part of a solution may need to be deferred for the life of the contract
Example: A “solution” that includes hardware, software and a three year service
contract. If not “distinct”, entire amount needs to be deferred.

27. MATERIALITY
Even if an item is distinct in terms of the contract, if it is “immaterial” you can elect to
combine it with an associated performance obligation
Example: $1,000,000 contract contains a performance deliverable of $50,000. No
need to account for it separately

28. LICENSING
ASC 606 has an extensive section regarding licensing
Licenses might be:
“Right to use” or “functional IP” – Recognize at a point in time
Software, drug formula, completed media content
Or
“Right to access” or “symbolic IP” – Recognize over time
Brands, team/trade names, logos, franchise rights
Change for Software industry: Software revenue will be recognized at inception of license, not
over the term of the license!

29. CONTRACT REVIEWS
Contracts must be reviewed, individually or by portfolio, for each reporting period to
determine if they still fit the definition of a contract, collectability
Performance obligations need to be reviewed periodically for pricing or other
changes to ensure proper treatment
Contract changes might trigger a new contract, or may require a true up – either
positive or negative – to conform with the revised contract terms

30. 5 KEY CONSIDERATIONS, ACCORDING TO RSM*
1. Adoption will require company wide efforts – accounting, tax, C-suite, IT, contracts, legal.
Don’t underestimate the complexity!
2. Required implementation dates are fast approaching!
3. Method of adoption will have significant impact on the level of effort – full retrospective
(restate all open contracts for two years prior) vs modified retrospective (reflect in current
period the cumulative change due to ASC 606, and disclose change line by line). Note that
modified severely impacts YOY financial comparisons!
4. The 5 step approach requires a significant amount of work!
5. Revenue recognition is only the beginning! Due to other accounting changes, i.e. ASC 842
– Leases, there may be overlapping implementations
* Taken from RSM Financial Reporting Insights for September 2017
http://rsmus.com/what-we-do/services/assurance/revenue-recognition-5-key-considerations-for-
implementation.html?elqTrackId=BA79DBC25D8E6FACEC3EBC91B7C51594&elq=77f28a3eaaa84a46912d2e2a38d5ae3c&elqaid=
43105&elqat=1&elqCampaignId=9948

32. HOW CAN YOU BE COMPLIANT IN DYNAMICS GP?
Spoiler Alert! You can’t! Unless….
You use Excel or use a third party (ISV) application
Let’s investigate the options…

33. OPTION 1: USE EXCEL
Build a complex spreadsheet to do SSP and reallocation of revenue calculations,
then manually JE back to GP.
Time consuming
Complex
Not a good use of time if more than a handful of contracts

34. OPTION 1: EXCEL - EXAMPLE
Initial Contract:
Item Ext. Price Type Contract Value SSP Contract SSP
Reallocated
Contract
Revenue Period Revenue
HW 15,000.00 One time 15,000.00 17,000.00 17,000.00 15,095.44 15,095.44
Setup Fee 5,000.00 One time 5,000.00 5,000.00 5,000.00 4,439.83 4,439.83
SAAS SW 7,000.00 Monthly 168,000.00 8,000.00 192,000.00 170,489.63 7,103.73
SW Annual Maint. 12,000.00 Def. 12 mo 24,000.00 12,000.00 24,000.00 21,311.20 10,655.60
Prof Services 3,000.00 Def event based 3,000.00 3,000.00 3,000.00 2,663.90 2,663.90
Discount - 1,000.00
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1,000.00 - - -
41,000.00 214,000.00 45,000.00 241,000.00 214,000.00 39,958.50
Remember the formula: (Item SSP / Sum of SSPs) * Contract Value
Example: SAAS SW: (192,000 / 241,000) * 214,000 = 170,489.63
Jan 2016 Invoice:
Item Ext Price Revenue Distribution
HW 15,000.00 15,095.44 AR 41,000.00
Setup Fee 5,000.00 4,439.83 Sales HW 15,095.44
SAAS SW 7,000.00 7,103.73 Sales Setup 4,439.83
SW Annual Maint. 12,000.00 10,655.60 Sales SW 7,103.73
Prof Services 3,000.00 2,663.90 Deferred Rev Maint 10,655.60
Discount - 1,000.00 - Sales Prof Serv 2,663.90
41,000.00 39,958.50 Contr.Rev.Clearing 1,041.50
41,000.00 41,000.00

35. OPTION 2: ISV SOLUTIONS
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• Line level billing – scheduled or milestone/event
• Line level deferrals – straight-line or milestone/event/percentage of completion
• Allocation of revenue based on Standalone Selling Price – Stored Amount / Invoiced Amount / List Price /
Percentage of Other Item(s)
• For more information: www.binarystream.com

36. OPTION 2: ISV SOLUTIONS CONT’D
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37. OPTION 2: ISV SOLUTIONS CONT‘D
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38. OTHER FEATURES
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39. SUMMARY / CONTACT US
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• Excel
• ISV Solutions – ARED, ARCB, MERA
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neil@binarystream.com
www.binarystream.com