IFRS 15: Key facts

IFRS 15: Key facts  (Just an abstract) 

What's in the new IFRS 15?

A new global framework for revenue recognition, The new revenue standard introduces a new framework that will change the way companies account for revenue.Almost all companies are affected by IFRS 15, but if you are in the telecom, software, engineering, construction or real estate industries, then you are likely to see more significant changes.

As part of IFRS-15 /606

• A five-step model is applied to determine when to recognise revenue, and at what amount.
• Revenue is recognised when (or as) a company transfers control of goods or services to a customer at the amount to which the company expects to be entitled.
• Depending on whether certain criteria are met, revenue is recognised either over time, in a manner that best reflects the company’s performance, or at a point in time, when control of the goods or services is transferred to the customer

The 5-step model in the standard requires companies to:

1. Identify the contract(s) with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract
5. Recognize revenue when or as the entity satisfies a performance obligation

The analysis required under the 5-step model will introduce new judgement and estimates into the revenue line item in the financial statements.The new standard will require analysis of all sales contracts to ensure the promises to the customer are identified and accounted for appropriately. Implementation efforts and costs may be significant for companies that earn the majority of their revenues under long-term contracts, particularly when those contracts include multiple goods and services.

Importantly, all companies will be subject to extensive new disclosure requirements. The standard also provides guidance on accounting for costs to obtain and costs to fulfill contracts with customers, which may change the timing of recognition for those costs

The impacts may be felt across the organization

• Revenue recognition may be accelerated or deferred
• Sales and contracting content and processes may be reconsidered
• IT systems may need to be updated or new modules added to calculate revenue
• Accounting processes and internal controls will need to be changed and documented
• Extensive new disclosures will be required, including the expected timing and amounts of future revenues
• Revisions may be needed to tax planning, covenant compliance and sales incentive plans
• Expected impacts leading up to adoption and changes reported upon transition will need to be explained to internal and external stakeholders.

Sector specific challenges of IFRS 15

Source - http://www.ey.com and home.kpmg.com

Oracle Revenue Management Cloud

Oracle Revenue Management Cloud

Oracle Revenue Management Cloud is a centralized, automated revenue management product that enables you to address revenue as defined in the ASC 606 and IFRS 15 accounting standard for Revenue from Contracts with Customers. The product provides a configurable framework to automate the identification and creation of customer contracts and performance obligations, their valuations and resulting accounting entries, and the ability to recognize the revenue over time or at a point in time.

Oracle Revenue Management Cloud is an application that enables you to manage customer contracts and performance obligations easily to help you address the revenue mandates of the new accounting guidance. Oracle Revenue Management Cloud is a Service which is part of Oracle Enterprise Resource Planning (ERP) Cloud Service and has the capability to work with any source application. The Service accesses data from and publishes to both Oracle ERP Cloud Service and with Oracle E-Business Suite. Robust data integration is available with third party applications. Integrated data includes sales orders, sales invoices, and other relevant sales and fulfillment data. Sales cycle data from various source systems is processed and managed centrally in Oracle Revenue Management Cloud.

Oracle Revenue Management  Cloud and On-Premise Co-Existence Architecture Overview

Oracle Revenue Management Cloud Functional Architecture Overview

The new accounting standard provides a new core principle for recognizing revenue: "Recognise revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expected to be entitled in exchange for those goods or services." It also outlines five logical steps to accomplish that as shown  below.

Oracle Revenue Management Cloud automates these revenue processing tasks thus minimizing manual interventions, and allowing organizations to comply efficiently and consistently with the ASC 606 and IFRS 15 core principle.

K E Y B U S I N E S S B E N E F I T S FROM Oracle Revenue Cloud

Oracle Revenue Management Cloud enables you to:

1. Easily adopt and implement revenue processes enabling ASC 606 and IFRS 15 compliance.
2. Automate the ASC 606 and IFRS 15 processes, increasing productivity, and reducing risk of error.
3. Review contract exceptions to ensure best-practice compliance and consistency.
4. Enhance the user experience and improve efficiency with productivity tools.

  K E Y F E A T U R E S Oracle Revenue Management provides:

1. Centralized repository with a single source of truth for ASC 606 and IFRS 15 sales cycle compliance.
2. Integration framework for third party source applications • Integration with Oracle ERP Cloud Service.
3. Integration with Oracle E-Business Suite including the ability to access relevant EBS data.
4. Automated identification and creation of customer contracts and performance obligations
5. Automated valuation of customer contracts and performance obligations.
6. Streamlined revenue management information on contracts and performance obligations via actionable user interfaces.
7. Automatic observation of Standalone Selling Price (SSP), or upload of SSP or Estimated Selling Price.
8. Automatic revenue allocation across performance obligations within each contract • Support for “point in time” and “over time” revenue recognition.
9. Separation of revenue from billing with the ability to recognize revenue independently of billing.
10. A role based work area that pushes exceptions to revenue managers and revenue analysts

All the above features offered by Oracle Standard Process ( Source of this article is documentation for Oracle Revenue Cloud).

Our Role - we as Integrator help you to 

1. Extract  and Load data as per your business Requirement.
2. Build Fault Tolerance mechanism to capture and resolve wrong data/errors.
3. Add business specific rules while extracting and Loading data.
4. Build new customer specific UI to valid data before loading into Revenue system ( On-Premise or in Cloud ( JCS or JCS-SX ).
5. Custom Reports.

Revenue recognition automation challenges and solutions

Performance obligations under the new revenue standard

ASC 606 Application For Subscription Companies

ASC 606 Application For Subscription Companies

Subscribed 2017 - Workshop: ASC 606 Application For Subscription Companies from Zuora, Inc.

How to Import historical revisions in Oracle EBS

you can Import  historical revisions for an Item through Import Items concurrent program

Execute following Steps to populate revision Interface :

1). Insert into MTL_ITEM_REVISIONS_INTERFACE table like below:

INSERT INTO MTL_ITEM_REVISIONS_INTERFACE
(ITEM_NUMBER,REVISION,ORGANIZATION_ID,DESCRIPTION,EFFECTIVITY_DATE,
PROCESS_FLAG, SET_PROCESS_ID , TRANSACTION_TYPE)
VALUES -- EXAMPLE DATA BELOW
('12122006-0','B',204,'REV-B',TO_DATE('30-JAN-2012','DD-MON-YYYY'),1,120,'CREATE');

COMMIT;

2). Run the concurrent program 'Import Items' specifying appropriate parameters.

3). Please check if revisions are created.