Overview of RAR

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RAR

Transcript of Overview of RAR

Page 1: Overview of RAR

New Revenue Recognition and Lease

Accounting Solutions

Pete Graham, Romeo DeLeon, Peter Muller

June 8, 2015

Page 2: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 1

Legal Disclaimer

The information in this presentation is confidential and proprietary to SAP and may not be disclosed without

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All forward-looking statements are subject to various risks and uncertainties that could cause actual results

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 2

Your presenters

Pete Graham

Director,

Finance Solutions & Mobility

Romeo De Leon

Vice President,

Product Management

Peter Muller

Director,

Partner Development

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 3

What’s in it for you?

• Revenue recognition is a mainly a

compliance topic first

• However, if customers adopt SAP as their

revenue recognition platform, Simple

Finance and S/4 HANA adoption is much

more likely based on results that we have

to date with the initial customers of SAP

Revenue Accounting and Reporting.

• For the Telco industry, their complexity and

volume means that they may look at HANA

as part of tackling their revenue

recognition challenge.

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 4

Agenda

Revenue Recognition Topic Overview

Implementation Timeline

Capture revenue contract data during the technical accounting assessment

SAP Lease Administration by Nakisa

Case study at Nakisa, Inc.

Simplify and automate revenue accounting

SAP Revenue Accounting and Reporting (v1.0 GA March 31, 2015*)

Case study at SAP Ariba

Wrap-up

*SAP Revenue Accounting and Reporting 1.0 Generally Available (GA) beginning March 31, 2015 principles.

http://www.news-sap.com/sap-simplifies-new-revenue-recognition-standard-sap-revenue-accounting-and-reporting/

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Revenue Recognition Topic

Overview

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 6

Revenue Recognition Standard Guidelines A Long and Thorough Process Is Concluding

2002

2008

2010

2011

2012

2017

• Deliberations began

• Discussion paper issued

• First exposure draft issued

• First comment period

• Redeliberations

• November 14, 2011 – Second exposure draft

• Effective date (IFRS preparers can early adopt)

• March 13, 2012 – Second comment period

ended

• April/May – Roundtables/outreach

• July to December – Redeliberations

• May 28 2014 – Final standard published

IFRS 15 and FAS 2014-09

2014

• *The revenue standard will be effective for annual reporting periods beginning on or after January 1, 2017.

Early application will be permitted in IFRS countries. On April 1, 2015, FASB proposed to delay the effective

date by 1 year to 2018 and permit early adoption under US GAAP. The IASB followed on April 29.

Final standard

published May 2014

Effective date latest

2017* (early adoption

possible for IFRS

preparers)

2017*

2013 • Q2 2013 – Effective date (latest 2017) and

transition decided

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 7

NEW Revenue Recognition Accounting and Reporting

Affecting All Revenue Contracts (IFRS 15, FAS 2014-09)

Final standard published May 2014

Effective date latest 2017* (early

adoption possible for IFRS

preparers)

New single principled 5-step model

(SSP) for recognizing revenue

Disclosure changes include both

quantitative and qualitative information

about the amount, timing, and uncertainty

of revenue from contracts with customers

and the significant judgments used

All companies (public and private) will

be required to prepare their revenue

contracts now to comply with this new

regulation by 2017*

1 Identify the contract with the customer

2 Identify the separate performance obligations in the contract

3 Determine the transaction price

4 Allocate the transaction price to the separate performance obligations in the contract

5 Recognize revenue when (or as) a performance obligation is satisfied

• *The revenue standard will be effective for annual reporting periods beginning on or after January 1, 2017. Early

application will be permitted in IFRS countries. On April 1, 2015, FASB proposed to delay the effective date by 1

year to 2018 and permit early adoption under US GAAP. The IASB followed on April 29.

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 8

IFRS Revenue Recognition Impact for Telcos

IFRS Revenue Recognition

Telco related scope

Accounting for multiple performance

obligations

Uncertain or variable considerations/

determining the transaction price

Collectability

Allocation of the transaction price and

establishing standalone selling prices

Equipment installation revenues

Contract costs/customer acquisition cost

Example*:

Customer closes 24 month contract

Monthly fee: 40 €

Activation fee: 30 €

Phone: 0 € (100% subsidized)

Phone stand alone selling price: 300 €

Phone purchase price: 290 €

Current IFRS:

• Total recognized revenue: 990 €

• Activation fee of 30 € regarded as revenue, phone 0 € revenue

(Contingent Revenue Cash-Cap-Method)

• The phone price of 290 € is recognized as cost of goods

New IFRS:

• Total recognized revenue: 990 €

[24 x 40 € + 30 € = 990 €]

• Activation fee is not regarded as independent revenue

(no standalone service)

• The delivery of the phone needs to be regarded as separate liability,

236 € revenue are recognized (Contract Asset activated)

[300 € / (24 x 40 € + 300 € ) x 990 € = 236 €]

• The remaining 754 € are delimited over the contractual period of 24

months [754 € / 24 = 31,41 €]

Contract

start

Month

1

Month

2

Month

3

Σ Month

4-24

Total

Current

IFRS

30 40 40 40 840 990

New

IFRS

236 31,42 31,42

31,42

659,74

990

The complex regulations and the new

calculation schemes require a

software solution, which fully

complies with the new accounting

standards, provides flexibility, and

supports an end-to-end audit trail * Source: IRZ, 2013, p. 17 (Patrick Lüpold, PWC AG)

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 10

Impact on Various Industries

Less impact

Invoice-Driven Revenue Recognition

Customer gets an invoice, pays and

receives the good or service at the same time

Telecommunication

High Tech

Professional

Service Provider

Automotive

Retail

Wholesale Construction

&

Engineering

Commodity (e.g., Oil & Gas, Mill, etc.)

Media

Pharmaceuticals

Healthcare (e.g., Diagnostic) …

- Impact +

Utilities

Considerable impact

Multiple Element Arrangements Appropriate revenue allocation

Mass Volume Automatic rule based revenue recognition required

Accrued revenues Long term projects

Long term shipment process

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 15

” “ Simplify and Automate Revenue Accounting

Average Volume & Complexity High Volume High Volume & Complexity

SAP Revenue Accounting and

Reporting

SAP Revenue Accounting and

Reporting

SAP Data Hub on HANA

SAP Revenue Accounting and

Reporting

SAP Data Hub on HANA

SAP Simple Finance

SAP Revenue Accounting and Reporting

Deployment Options

Page 12: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 16

Implementation Timeline Revenue Recognition

2014 2015 2016 2017*

Accounting

May 28, 2014:

Regulation

announced

Dual Reporting Period

Ends IFRS “Go-Live”

Date

Begin Accounting

Assessment Project

Prepare Opening

Balance Sheet Under

IFRS Rules

Solutions

SAP Lease

Administration by

Nakisa**

SAP Revenue

Accounting and

Reporting***

Benefits

Capture revenue

contract data during the

accounting assessment

Automate and Simplify

Revenue Accounting

**Licensed from the SAP price list, ***Included with maintenance for existing SAP Financials customers

*Proposed 2018 effective date pending

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 17

Revenue Contract Abstraction

Technical Accounting

Assessment

Sub-set

abstracted

manually

Accounting assessment under new Revenue Recognition

SAP Revenue Accounting

and Reporting Blueprint

Sales

contracts,

Orders, Bills,

Invoices,…

Revenue Accounting

and Reporting

Rules (BRF+)

ERP Financials

Typically a one-time manual process

Automatic process after implementation of SAP Revenue Accounting and Reporting

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Capture Revenue Contract Data During the Accounting Assessment

SAP Lease Administration by Nakisa

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 19

SAP and Nakisa partnering to deliver

Jointly developed with SAP

Part of the product and enhancement pack roadmap

Meets SAP premium qualification

Validated against SAP’s product standards for security,

performance, supportability, accessibility and documentation

Sold and supported by SAP

Around the globe

Exceptional user experience

Intuitive UI for transparency and role-based insights

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 20

SAP Lease Administration by Nakisa

• Sold and supported globally by SAP

• Supports ERP, HANA DB, HANA Cloud

Platform (HCP), Simple Finance

• Compelling events: new regulations

• New Revenue Accounting regulation –

Finalized in May 2014 and affects all public

and private companies

• New proposed Lease Accounting regulation –

updated Exposure Draft expected to be

finalized in 2015

• Land with SAP Lease Administration

and expand with additional solutions

for Accounting and Financial close

New Solution Now Available

Page 17: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 21

What’s in it for you?

• Incremental license revenue for VARs

• Implementation revenue on SAP Lease

Administration by Nakisa

• Implementation of related SAP solutions

(SAP ERP Financials, Simple Finance,

SAP Revenue Accounting and Reporting,

SAP Real Estate Management, Treasury,

Plant Maintenance)

• Advisory services on Revenue Recognition

and upcoming Lease Accounting

regulations

• Change Management consulting

• Data Migration services

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 22

Accounting and financial close process

Reporting and Analysis

Entity Close Management

Disclosure Management

Notes Management

Consolidation Intercompany Reconciliation

General Ledger

Sub-Ledger

Revenue Recognition

Lease Accounting

Financial

Accounting

Entity Close Corporate

Close

Reporting and

Disclosure

Internal Controls

Master Data Governance for Financials

Financial Close

Governance

Page 19: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 23

Solution capabilities for abstraction of revenue & lease contracts SAP® Lease Administration by Nakisa®

Increased

visibility

Collection and

Unification

Validation and

Traceability

Collaboration

Collection & unification Designed to provide visibility into your lease

and revenue contract exposure

Automated and effective data collection

Unification of data in one single repository

Collaboration Open collaboration framework to engage and

align business decision-makers

Simulation capabilities to analyze best response

to business changes

Efficiently evaluate lease vs. buy scenarios

Validation & traceability Validated true and useful data

Efficient traceability for compliance

Readiness for reporting requirements

Page 20: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 25

Visibility to Revenue contracts Revenue Recognition

Analytics to

help you

understand and

manage your

revenue

exposure

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 26

Leveraging the

simple 5-step

process as outlined

by IASB/FASB to

abstract Revenue

contracts

IASB/FASB process alignment Revenue Recognition

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 27

Easy-to-use

data collection

forms

Highly

configurable

extensible data

model

End-user productivity tools Revenue Recognition

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 28

Share comments

for specific

Revenue

contracts

Discussions with

multiple users

Collaboration Revenue Recognition

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 29

Generate contract

summary and

export to PDF

Contract summary Revenue Recognition

Page 25: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 30

Executive Summary Contract Data Abstraction and Revenue Recognition Use Case by Nakisa

Company:

• Nakisa Inc.

Industry:

• Software

Revenue Streams:

• Licenses

• Maintenance

• Consulting

• Training

• Assessment of a sample of 37 contracts, originated since 01/2015

• Contract types

Software licenses: 11

Consulting: 12

Change requests: 14

• Solution

SAP® Lease Administration by Nakisa®

Solution requirement gathering from Nakisa Finance team

Configuration of data fields according to Nakisa’s contracts

• Implementation

Implemented on-premise

Duration: Installation several hours; Implementation 25+ man hours

• Process

Contract upload through PDF

Data capture following the new 5-step process for revenue recognition

Page 26: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 31

5. Revenue Recognition Impact on Revenue Schedule

• Recognizing revenue for the same contract will be different for maintenance services

• Nakisa would need to change the internal revenue accounting process to allocate

transaction prices and recognize revenue for maintenance services based on the

standalone selling prices of the corresponding performance obligations

Year: 2015 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

Licenses $106,250

Maintenance $903 $903 $903 $903 $903 $903 $903 $903 $903 $903 $903 $903

Total $107,153 $903 $903 $903 $903 $903 $903 $903 $903 $903 $903 $903 $117,091

Licenses $97,576

Maintenance $1,626 $1,626 $1,626 $1,626 $1,626 $1,626 $1,626 $1,626 $1,626 $1,626 $1,626 $1,626

Total $99,202 $1,626 $1,626 $1,626 $1,626 $1,626 $1,626 $1,626 $1,626 $1,626 $1,626 $1,626 $117,091

Cu

rre

nt

Ne

w

Revenue recognized for Q1 under current practices is

108,959.00 compared to 102,454.00 under the new

standard for the same contract

Note: All data in Nakisa’s contracts and reports have been modified to preserve the confidential information

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Partner Program

Page 28: Overview of RAR

800+ enterprise

customers

subscribers

4M+ Available in

languages

18

Utilized in

125 countries

Caters to

24+ industries

Providing solutions

since 2001

Headquartered in Canada

Leader in Finance, Org &

Talent Management

Tier 1 SAP partner

since 2007

Partners

Page 29: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 34

Global Sales Play

• SAP customers with SAP

ERP Financials or SAP Real

Estate Management (or any

net-new customer)

• Concerned about meeting

IFRS Revenue Recognition

or Lease Contract

regulations

• Titles to target: CFO/VP, Accounting/

Chief Accounting Officer

Head of Compliance/

Financial Reporting

Manager of Accounting

Comptroller

• For Lease Administration: Transportation

Oil & Gas

Construction

All industries with

complex and large

volumes of lease

portfolios

• For Revenue Recognition: Telecommunications

High Tech

Pharmaceuticals

Engineering &

Construction

Entertainment & Media

Aerospace & Defense

All industries that have

revenue contracts

• Solution Extension to

SAP ERP Financials

SAP Simple Finance

SAP Real Estate

Management

• Support for

HANA Cloud

Platform (HCP)

HANA

Cloud/On-premise/

Hybrid deployment

Target customer profile Target industries Target customer profile Target industries Target solutions

Page 30: Overview of RAR

Your opportunity!

• Strong market demand for

Nakisa Financial products and

implementation resources

• Complete and extend your

Financial service offerings

• Nakisa customers want to work

with local Nakisa Solution

Provider

• Services Revenue through

Consulting services and

implementation enhancements

& integration

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 36

Page 31: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 37

Nakisa Partnership Process What’s next for you?

IDENTIFY ENGAGE ENABLE RUN

• Partner evaluation

based on Partner

Selection Criteria

• Sign Partner

Agreements

• Partner listing on

Nakisa website

• GTM business

planning with

objectives

• Partner Portal &

Demo Center

Access

• Sales Training &

Technical

Certification

• Monthly pipeline calls to

review progress on

objectives

• Joint Go-To-Market

strategy

• Marketing Funds

• Full Sales & Technical

Support

Page 32: Overview of RAR

Tra

inin

g

Co

nte

nt

Pra

cti

ce

Access to a demo license of Nakisa software to provide a playpen work environment for

trained consultants to increase their skills and knowledge and to build their own custom demos

to showcase their skills and innovative prototypes

Access to a library of marketing assets, sales

enablement material and product

documentation via the partner portal

Secured access to Nakisa solutions

demonstration systems

On-demand expert

classes for SAP

Lease Administration

by Nakisa

hands-on

implementation

training

Functional ramp-up

through

self-paced learning Free Sales and Pre-

Sales Training

Demo license

Partner portal Demo systems

Partner Enablement

Page 33: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 39

Next steps

WHITEPAPER

Getting smart about revenue recognition and lease accounting

www.nakisa.com/whitepapers-revenue-recognition-lease-accounting

WEBINAR

Upcoming changes in lease accounting standards:

How technology can help with costs savings today and regulatory

compliance tomorrow

www.nakisa.com/webinar-lease-accounting-standards

WEBINAR

New revenue recognition standards:

What the rule changes mean for your business

www.nakisa.com/webinar-revenue-recognition-standards

For more information and to sign up: www.nakisa.com/partners

Page 34: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 40

Implementation Timeline Revenue Recognition

2014 2015 2016 2017*

Accounting

May 28, 2014:

Regulation

announced

Dual Reporting Period

Ends IFRS “Go-Live”

Date

Begin Accounting

Assessment Project

Prepare Opening

Balance Sheet Under

IFRS Rules

Solutions

SAP Lease

Administration by

Nakisa**

SAP Revenue

Accounting and

Reporting***

Benefits

Capture revenue

contract data during the

accounting assessment

Automate and Simplify

Revenue Accounting

**Licensed from the SAP price list, ***Included with maintenance for existing SAP Financials customers

*Proposed 2018 effective date pending

Page 35: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 41

Revenue Contract Abstraction

Technical Accounting

Assessment

Sub-set

abstracted

manually

Accounting assessment under new Revenue Recognition

SAP Revenue Accounting

and Reporting Blueprint

Sales

contracts,

Orders, Bills,

Invoices,…

Revenue Accounting

and Reporting

Rules (BRF+)

ERP Financials

Automatic process after implementation of SAP Revenue Accounting and Reporting

Typically a one-time manual process

Page 36: Overview of RAR

Automate and Simplify

Revenue Accounting

SAP Revenue Accounting and Reporting

Page 37: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 43

Revenue Recognition

A revenue solution providing

advanced capabilities while ensuring

multi-GAAP compliance

Covers advanced revenue recognition scenarios,

such as multi-element arrangements

Tackles multiple accounting standards, including

the most recent IFRS/FASB regulations

Integrated with your financials and multiple logistics

systems

Solution Vision

Page 38: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 44

SAP IFRS Revenue Recognition Background

A project for a new revenue

recognition standard has been set

up to meet:

Changes in accounting standards,

e.g., US-GAAP SOP 97-2, EITF 08-

1, EITF 09-3, etc., replaced with one

standard for “contracts with

customers”

Parallel accounting and cost

recognition

Ongoing globalization

Increasing demand for high

performance revenue recognition

due to new business models (e.g.,

digital sales)

Ongoing Development Project

SAP’s Chief Accounting Officer,

Christoph Huetten, is Vice-

Chairman of the IFRS/IASB

Advisory Board

SAP meets with the IASB staff

regularly

SAP accountants are part of the first

corporate review team for the

upcoming rev. rec. standard

SAP meets with the Big 4 regularly

SAP has met with 100+ customers

on revenue recognition in the last 2

years

Page 39: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 45

Customer Engagement Initiative Revenue Recognition — Fantastic Customer Involvement!

In Detail

Large Pharmaceutical

Large consumer tech (2)

Telco

Media content provider

Large software Inc.

SAP

Info

Large IT consulting Inc.

Consumer phone Inc.

Defense contractor

Consumer good Inc.

Large chemical Inc.

Telco

Review

Construction equipment

Storage technology

Large printer Inc.

Consumer software

Large consumer tech

Large medical supply

Large industrial Inc.

Page 40: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 46

Customer Engagement Initiative Testers

In Detail

Large consumer tech (2)

Telco (2)

Large software Inc.

SAP

Large IT consulting Inc. (3)

Page 41: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 47

The Business Benefits — Our Goals For Key Stakeholders — Revenue Managers — from Day 1

Automation

Simplification

Easy to

Manage

Easy to Use

Clear

Visibility Auditability

Detailed

Transparency

Insight

Flexibility

Compliance

Page 42: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 48

SAP Revenue Accounting and Reporting* Value Proposal: Automate and Simplify Revenue Accounting

Automate

and

simplify

revenue

accounting

IFRS Bodies of Leadership

• Christoph Hutten – Chief Accounting

Officer of SAP AG and Vice-Chairman

IFRS Advisory Council Tracking new

rev rec standard with accounting boards

• Cross-functional internal products team,

including SAP corporate accounting

Time to Market for IFRS-

Compliant Solution

• Rev Rec Engine will be GA’d in 2015

• 30+ customers currently in co-

engineering collaboration with us on

this solution

• SAP Ariba division live in production

Proven Experience Delivering Revenue

Recognition Solutions

• 18,000+ customers using SAP for

revenue recognition

• Long history of solving finance and

accounting challenges for large

enterprises

• Market leadership in developing

innovative solutions

Robust and Flexible Solution

• Enables tracking and flexible

enforcement of Performance

Obligations

• Rev rec rules and rules engine are

decoupled from order entry and

billing systems

• Experience and software tools to

address data quality issues

inherent within multi-vendor

environments

• Designed to provide Massive

scalability

• Designed to address IFRS-specific

requirements, also capable of

addressing local GAAPs

• Ease of use for accountants

• Compatible with portfolio approach

*Included with maintenance for existing SAP Financials customers

Page 43: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 49

SAP Revenue Accounting and Reporting Automate and Simplify Revenue Accounting

Order

or

Invoice

Determine

Revenue

Accounting

Contract

Allocate

Revenue

Apply rules,

determine

performance

obligations

Events

Recognize

Revenue

Give revenue managers

flexibility and control of

the revenue accounting

process

Complies with new and

existing revenue

recognition standards

Determine

Transaction

Price

Page 44: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 51

Revenue Accounting Contract

What is a Revenue Accounting Contract?

A revenue accounting contract is an object that consists of performance

obligations that belong together. It represents the financial view of an

operational document, such as a sales order.

A revenue accounting contract serves as a container for performance

obligations. It typically represents an operational document that originates on

the back-end operational system, such as a sales order created on a Sales

and Distribution system. However, it can also represent an aggregate of

multiple operational documents in certain business scenarios.

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© 2015 SAP SE or an SAP affiliate company. All rights reserved. 52

SAP Revenue Accounting and Reporting

Decoupled Sales and Revenue Accounting

Revenue Accounting is like a sub ledger of FI

Page 46: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 54

Overview of SAP Roadmap for Revenue Accounting Roadmap highlights

Future direction Recent innovations Planned innovations

SAP Revenue Accounting and

Reporting 1.0 (GA March 31, 2015)

Multiple Element Arrangement

support

Multiple accounting principle

support

SD Order integration

Rules based support of POB

creation

Supporting IFRS 15 guidance in

presenting contract assets and

contract liabilities

SAP Revenue Accounting and

Reporting 1.1

General enhancements

• ŸGranular posting run

• Migration enhancements

• Accounting of contract modifications

enhancements (Prospective Changes)

• Archiving

• Processing of return orders

Improvements for Telcos, High

Technology, and other industries

including:

• BRIM Integration incl. basic requirements

for usage based revenue recognition

• Assumptions for invoices

• Account determination in adapter

SAP Revenue Accounting and

Reporting 1.x

Additional improvements Telcos,

High Technology

Improvements for Aerospace and

Defense, Engineering and

Construction, Professional

Services, and other industries:

Project based revenue

recognition (limited)

Transition capabilities for new

standard

Cost Recognition

Improvements in accounting for

variable considerations and

material rights

Page 47: Overview of RAR

© 2015 2015 SAP SE or an SAP affiliate company. All rights reserved. 55

Overview of SAP Roadmap for Revenue Accounting Roadmap highlights (cont.)

Future direction Recent innovations Planned innovations*

SAP Revenue Accounting and

Reporting 1.0 (in Ramp-Up)

Multiple Element Arrangement

support

Multiple accounting principle support

SD Order integration

Rules based support of POB

creation

Supporting IFRS 15 guidance in

presenting contract assets and

contract liabilities

SAP Revenue Accounting and

Reporting 1.1

General enhancements

• ŸGranular posting run

• Migration enhancements

• Accounting of contract modifications

enhancements (Prospective Changes)

• Archiving

• Processing of return orders

Improvements for Telcos, High

Technology, and other industries

including:

• BRIM Integration incl. basic

requirements for usage based revenue

recognition

• Assumptions for invoices

• Account determination in adapter

SAP Revenue Accounting and

Reporting 1.x

Additional improvements Telcos,

High Technology

Improvements for Aerospace and

Defense, Engineering and

Construction, Professional

Services, and other industries:

Project based revenue

recognition (limited)

Transition capabilities for new

standard

Cost Recognition

Improvements in accounting for

variable considerations and

material rights

*Currently targeted for a 2H 2015 release, subject to change

Page 48: Overview of RAR

© 2015 2015 SAP SE or an SAP affiliate company. All rights reserved. 56

Overview of SAP Roadmap for Revenue Accounting Roadmap highlights (cont.)

Future direction Recent innovations Planned innovations

SAP Revenue Accounting and

Reporting 1.0 (in Ramp-Up)

Multiple Element Arrangement

support

Multiple accounting principle support

SD Order integration

Rules based support of POB

creation

Supporting IFRS 15 guidance in

presenting contract assets and

contract liabilities

SAP Revenue Accounting and

Reporting 1.1

General enhancements

• ŸGranular posting run

• Migration enhancements

• Accounting of contract modifications

enhancements (Prospective Changes)

• Archiving

• Processing of return orders

Improvements for Telcos, High

Technology, and other industries

including:

• BRIM Integration incl. basic requirements

for usage based revenue recognition

• Assumptions for invoices

• Account determination in adapter

SAP Revenue Accounting and

Reporting 1.x*

Additional improvements Telcos,

High Technology

Improvements for Aerospace

and Defense, Engineering and

Construction, Professional

Services, and other industries:

Project based revenue

recognition (limited)

Transition capabilities for new

standard

Cost Recognition

Improvements in accounting for

variable considerations and

material rights

*Currently targeted for a 1H 2016 release, subject to change

Page 49: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 57

User Experience Shall Reflect Generic Guidance from

Standard

Revenue Accounting

Contracts (Search/List view)

1. Contract identification (e.g., contract combination)

2. Determination of Perf. Obligations (e.g., determine distinct/non-distinct performance

obligations)

3. Determination of Transaction Price (e.g., time value of money, variable

considerations)

4. Allocation of Transaction Price (e.g., based on SSP, SSP Range)

5. Satisfaction of Performance Obligation (e.g., time-based, event-based)

Other activities (e.g., contract overview, analytics/disclosures,

administration)

Page 50: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 58

SAP Revenue Accounting and Reporting Value Proposal: Automate and Simplify Revenue Accounting

Automate

and

simplify

revenue

accounting

IFRS Bodies Leadership

Time to Market for IFRS

Compliant Solution

Proven Experience

Delivering Revenue

Recognition Solutions

Robust and Flexible

Solution

Page 51: Overview of RAR

SAP Revenue Accounting

and Reporting

Implementation for Ariba

Page 52: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 60

Legal Disclaimer

The information in this presentation is confidential and proprietary to SAP and may not be disclosed without the permission of SAP. This

presentation is not subject to your license agreement or any other service or subscription agreement with SAP. SAP has no obl igation to pursue

any course of business outlined in this document or any related presentation, or to develop or release any functionality mentioned therein. This

document, or any related presentation and SAP's strategy and possible future developments, products and/or platforms directions and

functionality are all subject to change and may be changed by SAP at any time for any reason without notice. The information on this document

is not a commitment, promise or legal obligation to deliver any material, code or functionality. This document is provided without a warranty of

any kind, either express or implied, including but not limited to, the implied warranties of merchantability, fitness for a particular purpose, or non-

infringement. This document is for informational purposes and may not be incorporated into a contract. SAP assumes no responsibility for

errors or omissions in this document, and shall have no liability for damages of any kind including without limitation direct, special, indirect, or

consequential damages that may result from the use of this document. This limitation shall not apply in cases of intent or gross negligence.

All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from

expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates, and

they should not be relied upon in making purchasing decisions.

Page 53: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 62

Achievements

core cross-functional project resources

representing development, IT, accounting &

reporting partnered to implement Revenue

Accounting

11 Ariba entities live with Revenue

Accounting (phased go-live approach)

65,100 contracts migrated from legacy

systems

12 revenue accountants actively using tool

3 quarters closed using Revenue

Accounting for some Ariba entities

Early adoption of Revenue Accounting

facilitated business input to improve the tool

and user experience (co-innovation

approach)

Page 54: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 67

Common Sense Approach & Lessons Learned

• Data migration is complex and resource intensive depending on contract

complexity and quality of source data

• Consider staggered go live for multiple entities with high contract volumes

• Dress rehearsal of data migration in test system improved data quality in

production

• Understand how sales documents influence contract setup and changes

• End to end testing recommended, possibly including quote to order to

contract to reporting

• Identify process and reports up front to reconcile data to legacy systems

• Simulate initial posting for migrated contracts as an additional validation

step for data migration

Page 55: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 73

Where to Find More Information General Information

Where to go for more information?

www.sap.com/finance

http://go.sap.com/product/financial-

mgmt/revenue-recognition.html

SAP Revenue Accounting (internal) ● SAP Revenue Accounting and Reporting 1.0 was

built from the ground up to handle the new revenue

recognition regulation announced May 28, 2014 to

be effective January 1, 2017 in countries adhering to

both US GAAP and IFRS. The solution automates

the revenue recognition and accounting process and

simplifies the tasks of revenue accountants in

following the new accounting guidelines published

May 28, 2014.

http://help.sap.com/revacc_10

https://cfoknowledge.wordpress.com/2014/09/18

/the-new-revenue-recognition-standard-is-here-

now-what/

SAP Revenue Accounting Ramp Up ● SAP Revenue Accounting and Reporting 1.0 Ramp-

Up information

Ramp-Up Page - SAP Revenue Accounting and Reporting

| Online Nomination Request

Page 56: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 74

Key Learnings

The new revenue recognition standard will have an effective date of January 1, 2017; start preparing now for this standard; it will affect all industries, not just High Technology

The new revenue recognition standard will dramatically change the process of revenue recognition

The upcoming expected 5-step process for revenue recognition must be followed, so start training your revenue recognition personnel now and consider using SAP Revenue Accounting and Reporting for your system needs

The technical accounting assessment has to be completed up-front or in advance of implementing the system or any parts of the system solution

Remember that revenue recognition may have impacts on parallel reporting and on the financial close. Be well prepared to handle such situations.

This is not a “big bang” project; work in iterations across accounting, technology (system), and people (processes)

Use the new standards as an opportunity to improve systems, processes, and lower TCO for revenue recognition and lease administration activities within your finance departments

Page 57: Overview of RAR

Questions?

Page 58: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved.

Thank You!

Global Partner Support from Nakisa Global Solution Support from SAP

Romeo De Leon

VP, Product Management

P +1 (514) 605-2642

E [email protected]

Pete Graham

Director of Solution Management

P +1 (610) 661-5279

E [email protected]

Peter Muller

Director, Partner Development

P +1 (514) 473-3444

E [email protected]

Catherine Moran

Global Partner Director

P +1 (773) 685-3099

E [email protected]

Who to contact

Page 59: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved.

Thank You!

Pete Graham

Director, Finance Solutions and Mobility

SAP America, Inc.

3999 West Chester Pike

Newtown Square, PA 19073

[email protected]

Solution Management

Joseph (Joe) R. Svoboda, CPA

Sr Consulting Manager, Global Head Services, Finance and Controlling, North America Application Services

SAP America, Inc.

Highland Landmark III

3010 Highland Parkway, Suite 900

Downers Grove, IL 60515

[email protected]

Consulting Services

Page 60: Overview of RAR

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 78

© 2015 SAP SE or an SAP affiliate company.

All rights reserved.

No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP SE or an

SAP affiliate company.

SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE

(or an SAP affiliate company) in Germany and other countries. Please see http://global12.sap.com/corporate-en/legal/copyright/index.epx for additional

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Some software products marketed by SAP SE and its distributors contain proprietary software components of other software vendors.

National product specifications may vary.

These materials are provided by SAP SE or an SAP affiliate company for informational purposes only, without representation or warranty of any kind,

and SAP SE or its affiliated companies shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP SE or

SAP affiliate company products and services are those that are set forth in the express warranty statements accompanying such products and

services, if any. Nothing herein should be construed as constituting an additional warranty.

In particular, SAP SE or its affiliated companies have no obligation to pursue any course of business outlined in this document or any related

presentation, or to develop or release any functionality mentioned therein. This document, or any related presentation, and SAP SE’s or its affiliated

companies’ strategy and possible future developments, products, and/or platform directions and functionality are all subject to change and may be

changed by SAP SE or its affiliated companies at any time for any reason without notice. The information in this document is not a commitment,

promise, or legal obligation to deliver any material, code, or functionality. All forward-looking statements are subject to various risks and uncertainties

that could cause actual results to differ materially from expectations. Readers are cautioned not to place undue reliance on these forward-looking

statements, which speak only as of their dates, and they should not be relied upon in making purchasing decisions.