A recent article in Compliance Week paints a different picture from people who think that adoption of Revenue Recognition per ASC 606 is behind us.  Even though the new standard took effect on January 1, 2018, the issue of compliance as seen by auditors and the SEC is now just ramping up.

Public companies on calendar year accounting have now completed two quarterly filings under the new standards but the first year-end filing under the new standard is still some months away.

Bramasol, the leader in compliance and finance innovation solutions, is pleased to introduce a new, purpose-built application, Analytics for Revenue Recognition Disclosure Reporting.  This application is being introduced at SAP TechEd in Las Vegas, NV on October 2, 2018 and will be available for purchase starting on October 6, 2018 through the SAP App Center.

This complete Revenue Recognition Disclosure solution is comprised of both reports and analytics to streamline compliance with ASC 606 and IFRS 15 while also providing companies with valuable insights to manage revenue in relation to overall business goals.

The pre-defined report package includes 11 Revenue Recognition Disclosure reports developed in either ECC or BW.  These reports include disclosure quantitative, qualitative, and mixed report data. Quantitative reports for compliance are available out-of-the-box and custom Qualitative reports can be tailored to the specific needs of each company.

The Analytics for Revenue Recognition Disclosure Reporting application includes highly-flexible analytics that provide companies with the specific quantitative information needed to fulfill statutory reporting requirements and are designed to visually surface any set of relevant information needed to support accurate understanding and timely decision making.

Features of the app include:

• Overview page showing total deferred revenue rolling up from short term and long-term deferred revenue to total deferred revenue.
• Indicators for Posted Revenue, Deferred Revenue, and Recognized but not Posted Revenue.
• Disclosures of Impairment Loss per Contract and Revenue by Contracts and POB Type. 
• Interactive page allowing drill down and drill through on different POB Types and Contracts.
• Revenue page showing aggregated POBs with a POB Details report.
• Schedule page showing Deferred Revenue and Posted Revenue by contract as well as a Contract Revenue Schedule.

With the deadline for implementing ASC 606 and IFRS 15 now behind us for most public companies, a lot of CFOs and accounting staff have breathed a sigh of relief. 

However, for those companies running SAP ECC who chose the short-cut of using SD RevRec, there are still some big challenges ahead.

Even some choices that seem safe in the short run can turn out to be dead ends.

Now, as companies that took the SD RevRec "short-cut" look ahead to the future of SAP with S/4 HANA, they are discovering that SD RevRec will no longer be supported. Oops, dead end!

If you’re facing this specific challenge of how to get from SD RevRec in ECC to RAR supported in S/4 HANA, you should watch Bramasol’s recorded webinar.

Titled “SD RevRec is Dead. What Now?” this webinar will provide a roadmap for moving from your soon-to-be-gone SD RevRec implementation to a more sustainable Revenue Accounting and Reporting (RAR) solution that is integrated with S/4 HANA.

Listen as our RevRec Center of Excellence experts talk about the right sequence – RAR first or S/4 first, or is it simultaneous. What are my data considerations and how can I ensure a smooth transition?

Click below to watch recorded webinar on Sep 20,2018.

Note: All other webinar recordings  are made available to all if you were not able to attend the live session check our Resource Center

The video is now available of the most recent session in Bramasol's monthly series on Revenue Recognition. 

Recorded on August 22, 2018, "Revenue Accounting Implementation: Secret Sauce" provides a wide-ranging look at key lessons learned, best practices and implementation tips based on our industry leading track record of RevRec implementation. 

Hands-on experts from our Center of Excellence share their unique perspective on issues that have been encountered while working with more SAP RAR customers than any other consulting organization. 

As the recognized leader in SAP RAR and innovator of purpose-built solutions for rapid compliance, Bramasol has more experience than anyone else in the RevRec sector.

Think your RevRec requirements are unique? Do you wonder if you are really getting the right picture of your revenues or using SAP to maximum advantage? 

Watch this webinar video to hear what others are doing in their SAP RAR implementations.

Listen in as our experts answer participants' questions and drill down to explain how we have helped customers meet their revenue recognition requirements using Bramasol’s “secret sauce”. 

A pioneer in electronic design and automation and with a presence in more than seven countries, our featured customer offers bundles of hardware, software, support & training to industrial customers. The Company was running ECC 6.0 with SD Revenue Recognition and was in the process of implementing SAP RAR 1.3 to support a mandated transition to IFRS 15. The project delivers a "hard" transition from ASC605 to IFRS 15, running RAR 1.3 SP02 for ten company codes around the world. The deployment includes a migration of 26000 in-flight contracts.

As the clear leaders in design and implementation of Revenue Recognition solutions, Bramasol was the natural choice. Bramasol took this task on "In flight" from another system integrator and provided, A group of assets- a dedicated team including A RAR Project Manager, A Solution Architect, RAR Consultants and Developers to have smooth transition and best solution. One of the challenges was to secure the organization's investment in the prior development work. As there is no ‘one size fits all’ approach to this complex scenario, Bramasol could limit the disruption of the integrator change caused to the customer.

Please speak to us if you’re facing any transitional issues or implementation challenges, simply Request a demo. If you have a challenging or complex RevRec undertaking or just need the pioneer in SAP Revenue Accounting, do what the Fortune 500 do… Contact Bramasol

During the lead-up to implementation of the new Revenue Recognition standards, ASC 606 and IFRS 15, companies chose a variety of paths to get ready. 

In some cases, they took a long term view and implemented purpose-built solutions such as SAP Revenue Accounting and Reporting (RAR) to achieve compliance, while also laying the groundwork to optimize and transform their financial operations.

However, in some situations, companies simply tried to make as few changes as possible while cobbling together bare minimum compliance approaches.  One of these shortcuts used by companies running SAP was to try and squeeze compliance functionality out  of existing SAP SD Revenue Recognition functionality running in ECC environments.

From the outset, SD RevRec posed a number of shortcomings with regard to meeting the new requirements, including:

1. No Multiple Element Arrangements: SD RevRec does not support allocation of transaction price, one of the fundamental steps for ASC 606 and IFRS 15. Revenue is always recognized separately for every SD order item according to its specific pricing conditions.
2. Parallel Accounting: SD RevRec cannot manage different accounting principles, with makes it difficult to leverage automation and increases the effort needed for reconciliation by accounting teams.
3. Cost Recognition: Cost of Goods Sold (COGS) is not reconciled with revenue recognized.  SD can only recognize cost at the time of PGI or billing, depending on set-up of the pricing scheme in SD.
4. Disclosures and Reporting: Tranditional SD RevRec is not capable of meeting the new disclosure requirements for ASC 606 and IFRS 15.

Despite these limitations and the recommendations from SAP that customers transition to RAR, some companies managed to get by with SD RevRec for initial implementation of the new standards.

Unfortunately those companies are now facing another big hurdle in the near future because SD RevRec will no longer be supported as the SAP technology environment moves ahead to S/4HANA.  Current estimates indicate that SD RevRec will become dead-ended by the end of 2020.

So, if your company is in this situation, what should you be doing now?

1. The first step is to look at implementing SAP RAR as soon as possible.  If you have SAP, you already own the RAR solution as part of SAP FICO. Also RAR can be deployed as a RevRec engine for other ERP legacy environments.
2. Consult your outside accountants and knowledgeable SAP consultants to define a pilot program running SAP RAR in parallel with existing methods.
3. Look into leveraging a purpose-built fast-track approach such as Bramasol's Rapid RevRecReady Compliance Solution.

The most important issue is DO NOT WAIT!

The clock is ticking toward the end of SD RevRec and you're going to need a viable alternative in place!

Sometimes as you move forward, it can also be helpful to take a look back and see how far we've come. 

During the past three years, Bramasol has been at the forefront of thought-leadership, creating purpose-built solutions, and helping customers with implementation projects in the Revenue Recognition arena.

We firmly believe that companies can proactively leverage compliance with RevRec (ASC 606 and IFRS 15) and Lease Administration (ASC 842 and IFRS 16) to help drive overall Finance Innovation initiatives.

As a RevRec industry leader and primary co-innovator with SAP on development and deployment of Revenue Accounting and Reporting (RAR) application, Bramasol has continuously published ebooks and hosted webinars on a wide range of RevRec topics.

Below are some of the most popular RevRec blog posts from the past few years:

• Disclosure Reporting for Revenue Recognition: What You Need to Be Doing Now

• Revenue Recognition: Standalone Selling Price (SSP)

• Leverage RevRec to Drive Transformational Actions

• RevRec Projects Need a Structured Approach

• Checklist for Success with new SAP Revenue Recognition Application

• Everything You Need to Know About SAP RAR 1.2

• SAP Announces Revenue Accounting and Reporting (RAR) Version 1.1

LEARN MORE:
Join Bramasol at SAPPHIRE NOW and ASUG Annual Conference, June 5-7, 2018 in Orlando, FL

As leaders in compliance solutions, Bramasol will be showing the latest updates on RevRec and Lease Accounting as well as purpose-built packages and adaptable technologies for optimizing compliance within overall Finance Innovation solutions. We will be demonstrating the newest releases of SAP Revenue Accounting and Reporting (RAR) and SAP Lease Administration by Nakisa. In addition, you can see our purpose-built, turnkey packaged offering, RevRec Ready Rapid Compliance Solution for disclosure reporting.

The customer is a leader in the field of networking solutions, and designs, manufactures a variety of solutions from PIC and ASIC chips to complete hardware and software systems. These systems empower network operators to scale network bandwidth, accelerate service innovation and automate optical network operations. Service providers, cloud operators, governments and enterprises across the globe rely on their Intelligent Transport Networks to enable services that create rich end-user experiences based on efficient, high-bandwidth optical networking.

Once the customer decided to quickly comply with ASC606 & IFRS 16 and finalized on the SAP RAR 1.1 solution, they needed a partner that not only understood SAP RAR well but had a credible track record working with the high-tech industry. They were especially concerned with large data migration challenges that would require both standard as well as custom migration strategies.

With over 20 years of experience working with the High-Tech industry, Bramasol was the partner of choice and we quickly helped them to Go-live on SAP RAR 1.1. One of the major drivers to achieving this was the way Bramasol leveraged BRF+ to provide a solid framework for driving RevRec decisions scenarios. A mix of standard and customized solutions was also used to enable a smooth migration of legacy data to RAR. Post go-live, Bramasol continues to be a valued partner providing the customer with ongoing specialized support.

 In the words of the customer “Bramasol was crucial to our successful on-time launch.”

Check our other Customer Stories

The customer is a global publishing company, which specializes in academic publishing. The company publishes electronic and print books, journals, and encyclopedias, as well as training and educational materials. The organization markets its products to a number of segments including professionals, students, instructors, researchers and more.

The company faced challenging issues around Digital Media, Multi-currency Intellectual Property and other areas in digital publishing.  They needed a partner expert in SAP RAR and who could guide their SAP SI with RAR integration, data migration and testing challenges.

As the clear leaders in design and implementation of Revenue Recognition solutions, Bramasol was the natural choice. We brought in experts who worked with the SI to develop unique solutions to address all the challenges. After the execution of the project, Bramasol continued helping the customer with expertise and guidance in the rollout of their RAR solution especially with regard to Testing and Data Migration.

 If you can not watch the video here watch it on our YouTube channel Watch Customer Story Video

If you have a challenging or complex RevRec project or simply want the leader in SAP Revenue Accounting, do what the Fortune 500 do, contact Bramasol.

Now that the adoption deadline for ASC 606 ( IFRS 15 for IFRS filers), revenue recognition for public entities has passed, the readers of companies’ financial statements should expect a much more robust financial reporting over revenue recognition.  

In addition to the new five step model, companies now are required to disclose in a separate footnote, a new set of data points both quantitative and qualitative  about the company’s revenue recognition processes.

The objective of the new standard is to “disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows. Entities can accomplish this by providing qualitative and quantitative information regarding its contracts with customers, the estimates and judgments used to measure its revenue, and the nature of any assets recognized related to the costs of obtaining the contracts.”

How extended payment terms can mask important revenue recognition info in financial statements:

In a recent article published on cfo.com by Vincent Ryan on March 27, 2018, titled “Controller Charged in Revenue Recognition Scheme” he states that the SEC charged a public company controller with fraud by using a number of “improper tactics” including extended payment terms and then goes on to say that the SEC noted in its enforcement order that “The fraud created the misperception that Maxwell’s ultracapacitor growth was far more successful than reality,”  Extended payment terms are very common tactics to entice potential customers into a sale because the customer will get the good or service now but will not have to pay immediately. From a company perspective, this will increase the revenue recognized but a reader of the company’s financial statements will not be able to assess the payments terms and whether there is a significant financing component embedded within the company’s revenue recognition accounting processes.

How ASC 606 new disclosure requirements can bring more transparency to financial reporting:

ASC 606 strives to change that issue by requiring significantly more disclosure regarding that missing piece of information and also will require companies to bifurcate the related interest portion from the revenue portion. It could also cause more questions from the readers of a company’s financial statements knowing that there is a significant financing component disclosure. 

Disclosure of Significant Financing Components:

One of the new disclosure requirements specifically relates to the existence of a significant financing component in a revenue contract. Therefore companies will now be required to disclose to the readers of their financial statements in the new revenue disclosure any effects of financing separately from contracts with customers. The nature of the disclosure will inform the reader about whether there is any significant financing components that are over one year old. This new disclosure will inform the reader that the company is essentially financing the revenue transaction because for some transactions, the receipt of consideration does not match the timing of the transfer of goods or services to the customer (e.g., the consideration is prepaid or is paid after the services are provided). When the customer pays in arrears, the entity is effectively providing financing to the customer. Conversely, when the customer pays in advance, the entity has effectively received financing from the customer.

Relevant ASC 606 Excerpt: (ASC 606-10-32-20 An entity shall present the effects of financing (interest income or interest expense) separately from revenue from contracts with customers in the statement of comprehensive income (statement of activities). Interest income or interest expense is recognized only to the extent that a contract asset (or receivable) or a contract liability is recognized in accounting for a contract with a customer. In accounting for the effects of the time value of money, an entity also shall consider the subsequent measurement guidance in Subtopic 835-30, specifically the guidance in paragraphs 835-30-45-1A through 45-3 on presentation of the discount and premium in the financial statements and the guidance in paragraphs 835-30-55-2 through 55-3 on the application of the interest method.”)

Summary:

The new revenue recognition standard will bring much more visibility to a company’s revenue recognition processes and new data points that will help readers of the company’s financial statements more clarity to make more informed financial analyses.

Click here to learn more about how Bramasol can help with RevRec compliance and optimization.