© 2015 Nakisa Inc. All rights reserved.
New revenue recognition standards: What the rule changes mean for your business
#NakisaFIN
© 2015 Nakisa Inc. All rights reserved. 2
The new revenue recognition standards
Your roadmap to compliance
Technical assessment in practice: Nakisa internal use case
Key takeaways
Questions & Answers
Agenda
#NakisaFIN
3© 2015 Nakisa Inc. All rights reserved.
Listen to the full on-demand webinar
Watch now >
Missed the webinar?
© 2015 Nakisa Inc. All rights reserved. 4
The new revenue recognition standards
IFRS 15/ASC 606 are here
#NakisaFIN
5© 2015 Nakisa Inc. All rights reserved.
New Revenue Recognition accounting & reporting affecting all revenue contracts with customers (IFRS 15, ASC 606)
• All companies (public and private) required to prepare their revenue contracts now to comply with this new regulation by 2018*
• Final standard published:May 2014
• Effective date latest: 2018* (early adoption possible for IFRS preparers)
U.S. GAAP IFRS
Public entities Annual reporting periods beginning December 15, 2017
Annual reporting periods beginning January 1, 2018
Nonpublic entities
Annual reporting periods beginning December 15, 2018
Annual reporting periods beginning January 1, 2018
“IFRS 15 sets out the requirements for recognising revenue that apply to all contracts with customers.IASB Project Update, March 2015
*On April 1st, FASB proposed deferral of effective date*On April 29st, IASB proposed deferral of effective date
#NakisaFIN
6© 2015 Nakisa Inc. All rights reserved.
New 5-step process for recognizing revenue(IFRS 15, FAS 2014-09)
Identify the contract with the customer
Determine the transaction price
Allocate the transaction price to the separate performance obligations in the contract
Recognize revenue when (or as) a performance obligation is satisfied.
Identify the separate performance obligations in the contract
STEP 1 STEP 2 STEP 3 STEP 4 STEP 5
#NakisaFIN
7© 2015 Nakisa Inc. All rights reserved. 7© 2015 Nakisa Inc. All rights reserved.#NakisaFIN
8© 2015 Nakisa Inc. All rights reserved.
Potential impactChanges will affect the entire organization
Source: Deloitte. Bringing clarity to an IFRS world. IFRS 15 – Revenue from Contracts with Customers. 2014
#NakisaFIN
Employees• Remuneration schemes• Training• Project Management
Stakeholders• Shareholders (expectation/outlook)• Financiers (loan covenants)• Regulators (disclosures)
Systems• Update IT systems, Business models,
Company practices, Accounting policies, Internal processes and controls
Contracts• Assess contracts• Update terms & conditions• Re-negotiate contracts in the long term
9© 2015 Nakisa Inc. All rights reserved.
Business pain points Revenue Recognition
• Geographically and departmentally dispersed revenue contract information, requiring manual processes for data management.
• Lack of visibility into sales contract data, due to large volume of complex contracts with customers.
• No ability to conform to the upcoming revenue recognition standards.
9© 2015 Nakisa Inc. All rights reserved.#NakisaFIN
© 2015 Nakisa Inc. All rights reserved. 10
Your roadmap to compliance
#NakisaFIN
11© 2015 Nakisa Inc. All rights reserved.
Recommended implementation timeline
May 28, 2014:Regulation announced
Begin accounting and technical assessmentPrepare opening
balance sheet under IFRS rules
2014 2015 2016-2017 2018
Dual reporting period ends IFRS “go-live” date
Smooth transition &
implementation
Building a team & a plan Education Analyze
Technical assessment
IT systems, applications,
processes
#NakisaFIN
12© 2015 Nakisa Inc. All rights reserved.
Recommended implementation timeline2015: Accounting & technical assessment
Smooth transition &
implementation
Building a team & a plan Education Analyze
Technical assessment
IT systems, applications,
processes
May 28, 2014:Regulation announced
Begin accounting and technical assessmentPrepare opening
balance sheet under IFRS rules
2014 2015 2016-2017 2018
Dual reporting period ends IFRS “go-live” date
#NakisaFIN
13© 2015 Nakisa Inc. All rights reserved.
Accounting assessmentPlan, educate, analyze
• Team effort across many different corporate functions
• E.g. Finance, Sales, Legal, IT, Internal Auditors
PLAN
• Review final standard & implementation guidance
• Monitor Transition Resource Group deliberations & technical lines
EDUCATE• Review contracts and
understand effects of the standard
• Analyze current vs. proposed standard to identify changes
ANALYZE
#NakisaFIN
14© 2015 Nakisa Inc. All rights reserved.
Technical assessment
Objective:• Understand impact for your
organization• Prepare for changes
1. Complete up-front or in advance of implementing the full system
2. Understand new standard and translate into technical and business requirements
3. Once requirements are gathered, redesign and/or optimize processes, policies and systems
An entity will need to consider whether its IT systems, data models and related enterprise resource planning (ERP) and legacy system applications are able to capture, track, compile and report information in accordance with the needs of the standard.
“
Source: Ey: A closer look at the new revenue recognition standard. June 2014
#NakisaFIN
15© 2015 Nakisa Inc. All rights reserved.
IT system architecture for complianceData capture during technical assessment
SAP Lease Administration by Nakisa
Technical Accounting Assessment
Sub-set abstracted manually
SAP Revenue Accounting and Reporting Blueprint
Sales contracts, Orders, Bills, Invoices,…
Revenue Accounting and Reporting
Rules (BRF+)
ERP Financials
#NakisaFIN
Typically a one-time manual process
Automatic process after implementation of SAP Revenue Accounting and Reporting
16© 2015 Nakisa Inc. All rights reserved.
Recommended implementation timeline2016 - 2018: Preparing for and reporting under IFRS 15
May 28, 2014:Regulation announced
Begin accounting and technical assessmentPrepare opening
balance sheet under IFRS rules
2014 2015 2016-2017 2018
Dual reporting period ends IFRS “go-live” date
Smooth transition &
implementation
Building a team & a plan Education Analyze Technical
assessment
IT systems, applications,
processes
#NakisaFIN
17© 2015 Nakisa Inc. All rights reserved.
IT system architecture for complianceData capture during technical assessment
Technical Accounting Assessment
Sub-set abstracted manually
SAP Revenue Accounting and Reporting Blueprint
New sales contracts, Orders, Bills, Invoices,…
Revenue Accounting and Reporting
Rules (BRF+)
#NakisaFIN
SAP Lease Administration by Nakisa
ERP Financials
Typically a one-time manual process
Automatic process after implementation of SAP Revenue Accounting and Reporting
18© 2015 Nakisa Inc. All rights reserved.
Abstraction of revenue contractsSolution capabilities
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
#NakisaFIN
19© 2015 Nakisa Inc. All rights reserved.
Transition & implementationFull vs. modified retrospective adoption
• Comparative not restated, but additional disclosures required
• Recognize the cumulative effect of initially applying the new standard as an adjustment to the opening balance of retained earnings in the year of initial application
• Entities electing have to calculate revenues they would have recognized for any open contract as if they had always applied IFRS or U.S. GAAP to determine the cumulative effect of adopting the new standard
• Restate two comparative years prior to the implementation date
• Useful to furnish investors a full understanding of trends and favored by many companies.
• Systems need to be ready to capture data to perform dual reporting as early as the beginning of 2016
Full retrospective adoption Modified retrospective adoption
#NakisaFIN
© 2015 Nakisa Inc. All rights reserved. 20
Key takeaways
Be prepared
#NakisaFIN
21© 2015 Nakisa Inc. All rights reserved.
Key takeawaysBe prepared
• Revenue Accounting standards are here
• Ensure readiness for compliance with Revenue Accounting Standards
• Scalable & Efficient: Collect and centralize your revenue contracts
• Revenue Accounting will impact parallel reporting and the financial close
• Lease Accounting standards expected in 2015 (Webinar next week)
#NakisaFIN
22© 2015 Nakisa Inc. All rights reserved.
Listen to the full on-demand webinar
Watch now >
Missed the webinar?
23© 2015 Nakisa Inc. All rights reserved.
Next steps
WHITEPAPERGetting smart about revenue recognition and lease accountingwww.nakisa.com/whitepapers-revenue-recognition-lease-accounting
WEBINARUpcoming changes in lease accounting standards: How technology can help with costs savings today and regulatory compliance tomorrowwww.nakisa.com/webinar-lease-accounting-standards
Contact us: [email protected]
#NakisaFIN
Top Related