As you know there are contract revenue reporting changes coming up January 1, 2018. These are under ASC 606 and IFRS 15.
Account Determination is a critical step in transitioning to the new ASC606 and IFRS15 revenue recognition rules using SAP Revenue Accounting and Reporting (RAR).
The 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).
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.
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.
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:
As companies prepare for the new standard, a common trend can be seen: most companies undertake a Proof of Concept. There are many reasons for this, but the top 5 reasons can be grouped as follows:
