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Per WSJ: Many Companies Are Falling Behind on RevRec

Posted by Bramasol RevRec Team on Wed, Jun 14, 2017 @ 10:37 AM

RevRecReady-HotNews.jpgThere are only six months left before the mandated adoption of new Revenue Recognition standards ASC 606 and IFRS 15.

Since companies need to comply with legal disclosure reporting requirements, including a retrospective dual-reporting period between current ASC 605 and new ASC 606, it is critical that you have a clear disclosure reporting plan in place, NOW!

The Wall Street Journal (WSJ) published an article on June 5, 2017 titled "Tech Teams Rush to Catch Up as New Accounting Rule Looms", which provides an excellent overview of what companies are up against as the countdown clock races toward the January 2018 deadline.

Here is a key excerpt from the article:

"For large corporations, the task is arduous and complicated: Accountants are scouring thousands of bills and contracts to determine if they must change how they book the sales for fiscal years beginning after Dec. 15. Meanwhile, tech departments are writing new code, upgrading their systems and investing in expensive new software as they work to ensure their increasingly automated finance operations can keep up.

It’s not clear all of them can.

For large corporations, the task is arduous and complicated: Accountants are scouring thousands of bills and contracts to determine if they must change how they book the sales for fiscal years beginning after Dec. 15.

 

Meanwhile, tech departments are writing new code, upgrading their systems and investing in expensive new software as they work to ensure their increasingly automated finance operations can keep up.

It’s not clear all of them can."

The article also states that: "Large companies often have legacy IT systems cobbled together over decades and through multiple acquisitions. Changing something as integral as revenue recognition often means dismembering the complex systems and then putting them back together".

Overcoming these challenges is the primary goal of SAP Revenue Accounting and Reporting (RAR), which was designed from the bottom up as a powerful, flexible RevRec reporting engine that can be used with existing SAP ECC and a wide range of 3rd Party ERP and legacy financial systems.

As a co-innovator with SAP on the development and deployment of SAP RAR, Bramasol is the industry leader in helping companies come to grips with the reality of the new RevRec standards.

Part of our work on this topic has been hosting a series of monthly Revenue Recognition Webinars for over 18 months. Click Here to view Videos of Past Revenue Recognition Webinars.

To learn the latest about Disclosure Reporting and the Dual-Reporting requirements referenced above, click below to register for June 28 Webinar on Dual-Reporting with SAP RAR.

Register for June 28 RevRec Webinar Dual-Reporting with SAP RAR

 As the leaders in SAP RevRec we can help you be prepared and ready…  

Call us at (866) 625-9878 or Click Below to Request RevRec Help

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Topics: revrec hot-tips, RevRec hot-news

Rev Rec Hot-Tip: It's now too late to start a custom Rev Rec Solution.

Posted by Bramasol RevRec Team on Tue, Oct 18, 2016 @ 08:07 AM

RevRecReady-HotTip-12.jpgWith the new Revenue Recognition standards (ASC 606 and IFRS 15) mandated for implementation by January 1, 2018, companies that haven't already started projects are falling dangerously behind. In fact, it's now too late to start a custom revenue recognition solution from scratch.

In a recent article in Compliance Week, Thack Brown, general manager and global head of line of business finance at SAP, put it this way. "CFOs are facing a perfect storm of accounting regulation, with three major IFRS standards converging in rapid succession, Time to implement these new processes is running out.”

“It takes approximately 18 months for the average Fortune 1000 company to make a change of this magnitude, and we just passed that point in the countdown to the mandatory effective date of the new standards, Corporate finance departments should act now to ensure that they are prepared for the transition and have the right tools to automate and simplify the process.”

That's why so many companies are turning to SAP Revenue Accounting and Reporting (RAR) to streamline their implementation and transition to the new standards.

New features in the SAP Revenue Accounting and Reporting 1.2 release include cost recognition, capitalized costs integration with project systems and results analysis from SAP, improved contract combination and modification capabilities, and integration with service and billing scenarios in the SAP Customer Relationship Management application, plus advanced features for transition to the new IFRS 15/ASC 606 accounting standards.

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Topics: revenue recognition, revrec hot-tips

Rev Rec Hot-Tip: If you run SAP, you already own SAP RAR

Posted by Bramasol RevRec Team on Thu, Sep 22, 2016 @ 05:48 PM

RevRecReady-HotTip-11.jpgAs you know there are contract revenue reporting changes coming up January 1, 2018.  These are under ASC 606 and IFRS 15.

If you have SAP, you already own a solution as part of SAP FICO called Revenue Accounting and Reporting (RAR).

Depending on the complexity, the implementation is 6-12 months. 

To perform parallel reporting before January 2018, a solution needs to be in place by mid 2017.   

Click below if you'd like to learn how SAP RAR can help you get #RevRecReady

Request RevRec Consulting Support

 

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Topics: revenue recognition, revrec hot-tips

RevRec Hot-Tip: Account Determination is Key in SAP RAR

Posted by Bramasol RevRec Team on Wed, Aug 10, 2016 @ 08:00 AM

RevRecReady-HotTip.jpgAccount Determination is a critical step in transitioning to the new ASC606 and IFRS15 revenue recognition rules using SAP Revenue Accounting and Reporting (RAR).

In SAP RAR 1.2, certain account determination rules derive the target account for the target accounting principle from a reference account that exists under a specific accounting principle, known as the "base accounting principle".

The reference accounts passed from the logistics system are only for the base accounting principle. Therefore, you can use a different set of rules to determine the reference accounts for accounting principles other than the base accounting principle. These reference accounts are used to make postings for recognizing revenue. They are also used as an input to the other account determination rules (allocation difference, allocation difference for linked performance obligations, and right-of-return adjustment).

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For each revenue-related posting, the system provides a reference account as the starting point of the account determination process. The reference account is provided as the input of your determination rules. This account usually comes from outside Revenue Accounting and varies depending on the type of account that needs to be determined. For example, when determining the account of the Receivable Adjustment account, the system uses the Accounts Receivable account (defined in the master data of the customer record) as the reference account, so your determination rules can use that account to derive the account that will eventually be used.  Your rules can disregard the reference account and use other fields as the criteria.

To learn more about the details of Account Determination and the implementation of SAP RAR 1.2 you can request a free consultation.

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Topics: revenue recognition, revrec hot-tips, SAP RAR

RevRec Hot-Tip Video: "How to Download SAP RAR 1.2"

Posted by Bramasol RevRec Team on Fri, Aug 5, 2016 @ 12:00 AM

RevRecReady-HotTip.jpgBramasol has just released a new quick tutorial video on "How to Download SAP RAR 1.2".

Click here to watch this short 7-minute how-to video.

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Topics: revenue recognition, revrec hot-tips

RevRec Hot-Tip: If you plan to run parallel for six months, you've got Less Than a Year to Be Ready!

Posted by Bramasol RevRec Team on Tue, Jul 5, 2016 @ 09:00 AM

RevRecReady-HotTip.jpgThe January 1, 2018 deadline is fast approaching and more and more companies are looking at their plan for implementing the new standards (ASC 606 and IFRS 15).

But, since a prudent approach for most companies also includes running parallel financial processes for two fiscal quarters, the time left to get ready is not actually 18 months - it is really now less than a year!

Those companies that are on a path to be #revrecready already should have formed their core teams, assessed their data, and started a Proof of Concept to model the changes.  

Is your company on the path to #revrecready success or falling behind the curve?

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Topics: revenue recognition, revrec hot-tips

RevRec Ready Hot-Tip #17 - What is a Performance Obligation?

Posted by Bramasol RevRec Team on Mon, Mar 14, 2016 @ 06:25 AM

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Per ASU 2014-09, a performance obligation is a promise in a contract with a customer to transfer a good or service to the customer. If an entity promises in a contract to transfer more than one good or service to the customer, the entity should account for each promised good or service as a performance obligation only if it is (1) distinct or (2) a series of distinct goods or services that are substantially the same and have the same pattern of transfer.

A good or service is distinct if both of the following criteria are met:

  • Capable of being distinct: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer.
  • Distinct within the context of the contract: The promise to transfer the good or service is separately identifiable from other promises in the contract.

A good or service that is not distinct should be combined with other promised goods or services until the entity identifies a bundle of goods or services that is distinct.

To learn more about how SAP RAR 1.1 can help you define and manage performance obligations within the scope of a comprehensive RevRec environment, contact us be clicking the link below.


 Request RevRec Consulting Support

 

 

 

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Topics: revenue recognition, revrec hot-tips

RevRec Ready Hot-Tip #16 - Consider How RevRec Impacts Your Sales Team

Posted by Bramasol RevRec Team on Tue, Mar 8, 2016 @ 02:48 PM

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Compensation or Commissions

Many companies have employees with bonus or payments tied to a revenue target who may be impacted by RevRec changes:

For example: A sales person sells a year subscription to use a widget which generates $1,200 in revenue.  In the past, if the sales person got paid 10% of the revenue when it was recognized, the sales person would get $120 once the sale closed.  Under the new guidelines, this revenue now has to be prorated for recognition, so now the sales person would get $10 a month for a year based on the monthly recognition of the revenue – a significant change!

Understanding the changes in the revenue schedule and how it impacts employee compensation is critical and needs to be addressed early in the implementation process.

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Topics: revenue recognition, revrec hot-tips

RevRec Ready Hot-Tip #15 - Choosing a Full or Modified Retrospective

Posted by Bramasol RevRec Team on Tue, Mar 1, 2016 @ 09:56 AM

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One of the key first steps for implementing the new Revenue Recognition standard is to determine which adoption method, full retrospective or modified retrospective, will be used.  This key decision will depend on several factors including resource availability, reporting requirements, and timing of the project. When you convert to the new method of recognizing revenue, the previous years of recognized revenue need to be migrated over so that you have the complete picture for ongoing contracts and revenue streams.

Companies basically have to choose between two options for adoption:
Full Retrospective: Under this option you have to recast previous financial statements as if the new guidance had always existed for a comparative two-year period prior to the adoption year. This approach can require significant time and effort – unless you leverage the opportunity to start collecting data sooner by running the new system in parallel.


Modified Retrospective: Under this option, companies can choose to report their financials under the new rules in the adoption year and also include full disclosure accounting for the same year under the legacy guidance. Not only does this put extra pressure on the closing process by having to close the books twice in every quarter; it also has the potential for “lost revenue” if the new guidance recognizes less revenue than the previous method would have in a particular period.


In either case, it is critical to begin understanding the implications for your specific business situation now so that that you can choose the best path forward and minimize any extra work or disruptions.

Once the adoption method is determined, future decisions become much easier.  The next step is to use  a Proof-of-Concept that enables you to begin modeling and testing the specific business cases and processes that are relevant to your specific situation.


To learn more about how to get started read Larry McKinney's blog post on The Top Five Benefits from a Revenue Recognition Proof of Concept.

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Topics: revenue recognition, revrec hot-tips

RevRec Ready Hot-Tip #14 - Understanding Data is Critical

Posted by Bramasol RevRec Team on Wed, Feb 24, 2016 @ 06:27 AM

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When evaluating how you will capture the required data, there are many considerations to include.  Based on what we have seen with our customers, the gathering of information falls into three key categories:

  • Legacy System Data
  • Enterprise System Data
  • Other External Data

To learn more about these categories and the methods for gathering data, read Larry McKinney's blog post on Revenue Recognition: Don't Underestimate New Data Requirements.

 

 

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Topics: revenue recognition, revrec hot-tips