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Evolving with ASC 606/ IFRS 15 Revenue Recognition Standard Session ID: 11281
Helle Hennings Senior Product Strategy Director Timothy Hricko Senior Director, Product Management Oracle Applications Development April 8, 2019
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Safe Harbor Statement
The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, timing, and pricing of any features or functionality described for Oracle’s products may change and remains at the sole discretion of Oracle Corporation.
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UPTAKE EBS ENHANCEMENTS
Modern User Experience and Mobility
Functional Innovation
Oracle’s Investments for EBS Customers Leverage EBS Strengths Combined with Broader Oracle Cloud Portfolio
Operational Efficiency
CX Cloud
HCM Cloud
SCM Cloud
ERP Cloud
Inve
stme
nts fo
r EBS C
usto
me
rs
EXTEND EBS WITH ORACLE SaaS APPS – HYBRID COEXISTENCE • Supply Chain Planning Cloud • In-Memory Cost Mgt • AI for Manufacturing • Transportation Mgt
• Planning & Budgeting • Revenue Mgt • Project Portfolio Mgt
• Sales • CPQ • Service
• HCM-EBS ERP • Core HCM-EBS Payroll • Recruiting-EBS HCM
Load Balancing
Database Cloud Service
Compute Networking Exadata
Cloud Service Storage
REPLATFORM EBS ON ORACLE CLOUD INFRASTRUCTURE
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Program Agenda
Evolving Practice
Integrating With EBS
Integrating with Project Accounting
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2
3
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Program Agenda
Evolving Practice
Integrating With EBS
Integrating with Project Accounting
1
2
3
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At the end of the day, your sales are the same • I’m just trying to figure my deferred revenue at fair value
• Now I need a revenue engine to book my invoices
• The SSP observation tool should work on components
• We keep our revenue nice and smooth for the shareholders
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At the end of the day, your sales are the same but just everything about the process is different
ꙋ I’m just trying to figure my deferred revenue at fair value
You are trying you figure your debt to customers for goods & services, offset by your future right to bill them, and you value that debt at expected consideration allocated on the basis of your “separate & similar sale” selling prices.
ꙋ Now I need a revenue engine to book my invoices
You need to review at inception, accrue the obligation when either party acts, and can’t record an invoice as a receivable until time is the only obstacle to collection. Invoices wash against contract assets.
ꙋ The observation tool should work on components
VSOE is gone. You either (a) observe SSPs or sell at SSPs, or you (b) estimate “Separate & Similar Sale” Standalone Selling Prices. Components are not separate sales; and SSPs are supported by separate sales.
ꙋ We keep our revenue nice and smooth for the shareholders
Today, under ASC 606 & IFRS 15, we recognize revenue on transfer to customers – volatile or not
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ASC 606 and IFRS 15 Compliance Automation The Standard’s Five Steps to Revenue
Third party and On Premise (EBS) Sales Cycle Data
Cloud Service order, billing, & fulfillment data
Revenue Management
Cloud Service General Ledger
EBS General Ledger
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The Famous Four Chevrons and Box: Steps 1-5 to Comply
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US GAAP’s ASC 606 and IASB’s IFRS 15
RMCS FUNCTIONALITY
Import Source Data
Identify the Separate
Performance Obligations
Identify the Contract(s)
With Customer
Determine the
Transaction Price
Accrue the Performance
Obligation
Recognize Revenue When a
Performance Obligation is
Satisfied
Import PD->PO->Contract Rules Allocation Accounting
RR IPE
Allocate The
Transaction Price
“IPE” = Initial Performance Event, system event for “either party performing”
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Getting started - Identify data needed to: Review Contracts and Allocate Prices at Inception
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1. Contract ID # x Transaction Net Billing Sale Price
Apparent Discount/ Premium
Standalone Or ESP
Basis for Alloc.
4. Allocation Revenue & POb Value
Discount Allocation
Nets to Zero
True Discount
2. Perf. Obligation #1 40 (20) 60 95% * 60 = 57 17 (3)
Perf. Obligation #2 55 15 40 95% * 40 = 38 (17) (2)
3. Transaction Price 95 Transaction Price = Expected Consideration = 95 0
Stand Alone Price Contract Discount, SSP-Trx: 95-100=
100 (5) 95/100=95% relativity; a 5% discount (5)
ASC 606 and IFRS 15 repeat the phrase “Review the Transaction at Inception and” several times
1. Identify the Accounting Contract 2. Identify the Promises to the Customers 3. Determine the Transaction Price 4. Allocate the Transaction Price to the Promises based on Separate Sale prices
ASC 606 & IFRS 15’s 1st 4 steps
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Identify that Data in your ASC 605 or IAS 18 EBS Deployment The practical side of adopting the standard
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1. Contract ID # x Transaction Net Billing Sale Price
Apparent Discount
Standalone Or ESP
Basis for Alloc.
4. Allocation Revenue & PO Value
Discount Allocation
Nets to Zero
True Discount
2. Perf. Obligation #1 40 (20) 60 95% * 60 = 57 17 (3)
Perf. Obligation #2 55 15 40 95% * 40 = 38 (17) (2)
3. Transaction Price 95 Transaction Price = Expected Consideration = 95 0
Stand Alone Price Contract Discount, SSP-Trx
95-100=
100 (5) 95/100=95% relativity; a 5% discount (5)
Review the Transaction at Inception And…
1. Identify the Accounting Contract 5. Determine whether the Promise is Point 2. Identify the Promises to the Customers in Time or Over Time 3. Determine the Transaction Price 4. Allocate the Transaction Price to the Promises
What data do you need to identify POs? Where
is it? How will you identify distinct? What is
your Unit of Account?
Where should we read your customer facing pricing from? Orders? Price Lists?
Do you trust the total you are giving us? Have
you a process in place to complete estimates
before loading?
Where will your SSP or ESPS come from?
How will your match them to your PObs?
Do you know the business events that will represent either party acting, and will send
us to book the accrued obligation? You might not be able to rely on invoicing.
We’ll match your bills to your assets
to follow this. What cross
reference to use?
Do you know the business events that will represent transfer to customer, and
will send us to recognize revenue? The 4 tests of GAAP are replaced with 7.
What data do you need to identify &
link contracts? Where is it?
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Topside Adjustments Topside Adjustments
Activate RMCS
606 / 15 GRC
RMCS
Adoption Ledger
Performance Obligation Accounting Subledger
System Cut Over Day
Revised 2018 Plan: Cut System over after Adoption Day
We are very close to the wire
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Corporate “GAAP” Ledger Deferred Revenue stops on cutover Go ASC 606 / IFRS 15
Today ASC 606 / IFRS 15 Adoption Day
Start Go Live #1 for Historical Data
Go Live #2 for Current Trxs
Go Live #3 for ASC 606 or IFRS 15 External Reporting
Go Live #4 in your current sub-ledgers
Initiate RMS Iterative Modeling
Calculate the 606/15 value of your recent Deferred Revenue-ish
transactions
Process Current Transactions using 606/15
Rules
Adopt The Standard – Stop reporting Deferred Revenue,
Start 606/15
Support your external reporting with Subledger
data
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Program Agenda
Evolving Practice
Integrating With EBS
Integrating with Project Accounting
1
2
3
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Replatform on OCI • Start with DEV/TEST • Add or migrate your DR on Cloud • Place your “Reporting” Env. on Cloud • Shift your PROD to Cloud when ready
Migrate to SaaS • Migrate by pillar • Migrate by product line or business unit • Migrate by country/region • Avoid complex integration scenarios
Extend with SaaS - HYBRID • Supply Chain Planning Cloud • In-Memory Cost Mgt (IMCM) • Planning & Budgeting, Revenue Mgt • Adaptive Intelligent Apps • OTM, GTM and more….
Practical Paths to Oracle Cloud for EBS Customers Any Combination of these Paths – Journey to the Cloud
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Oracle Cloud Service Technology Imports The Selected Data
PaaS
PaaS
Pre-built
Pre-packaged
Native
ERP Cloud
Native Integration Flows • Single common architecture for Employees,
Users, Security, Geography, Customers, etc.
• Requisition to Receipts Supplier Invoice to Payment ; Expense Reports to Reimbursement
• Period Close to Financial Reports; Budget to Approval
• Credit Review to Approval
Configure Quote to Order
Customer Invoice to Receipt
Pre-packaged Integrations • Accounting Hub Reporting Service with EBS
• Revenue Management Cloud Service with EBS
Integration Services
Integration Platform
Integration Services • Setup Services
• Bulk Inbound/Outbound Services
• Transactional Services
Pre-built Integrations • Integrated Quote-to-Cash with CPQ Cloud
Service and Financials Cloud Service
• Planning and Budgeting Cloud Service
with Financials Cloud Service
Integration Platform • Orchestrate Inbound/Outbound Bulk
Data Flows across On-Premise, PaaS, and
ERP Cloud
• Orchestrate Setup/Transactional Services
across On-Premise, PaaS, and ERP Cloud
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Code hooks Seeded
Extract Views
Import Sales Related Data – Overview of ETL (Extract, Transform, Load)
EBS
3rd Party Application
Source Applications UCM:
Universal Content Manager
Revenue Management Cloud
Interface Tables
RM base tables
Custom extract program
Data Files (Source
headers, lines & sublines) Revenue Management Daily
Job Set Extract
Transform
Load Extract Revenue Basis Data program
Register the new source Document Type
Create Revenue Management Data Export File program
control file
Load Interface File for Import Job (automatically triggered)
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Pre-built integrations with EBS
Performance Obligation Valuations
Sales Cycle Data
Feedback
SLA
Oracle E-Business Suite Subledgers
Oracle E-Business Suite
General Ledger
Oracle Financials Accounting Hub
Receivables
Order Management
And Others
SLA
Other Sources
Non-Oracle Systems
Non-Oracle Systems
Non-Oracle Spreadsheet
Custom
Data
Revenue Management Cloud
UCM
You & SI work together to identify data to pull, and business event drivers
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Pre-built integrations with EBS
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Pre-built integrations with EBS
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ASC 606 and IFRS 15 Compliance Automation The Standard’s Five Steps to Revenue
Cutover and Subsequently
Pre-Cutover
Subledger & Ledgers
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Working with EBS
Revenue Management
EBS General Ledger
SLA
Other EBS Sub-ledgers – Receivables, Payables, Fixed Assets, Inventory, Costing, and so on, via SLA
(Second) Secondary ASC 606 &
IFRS 15
Core GL
Optional Secondary
Whether National
Or Corporate
Primary Whether
Corporate Or
National
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ASC 606 and IFRS 15 Compliance Automation The Standard’s Five Steps to Revenue
Cutover and Subsequently
Pre-Cutover
Subledger & Ledgers
22
Working with EBS
Revenue Management
EBS General Ledger
SLA
Other EBS Sub-ledgers – Receivables, Payables, Fixed Assets, Inventory, Costing, and so on, via SLA
(Second) Secondary ASC 606 &
IFRS 15 Core GL
Optional Secondary
Whether National
Or Corporate
Primary Whether
Corporate Or
National
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Other Considerations and Points to be Noted
• To get the data you need per your review at inception style analysis,
– You can “copy and edit” views, with code hooks OR:
– You can do a “third party integration”
– It may or may not be captured in your current footprint, optimized for the old rules
• Setup Utility to redirect EBS Receivables SLA Accounting to the RM Clearing Account in the Corporate EBS Ledger on cutover
– AR Revenue Schedules remain available for use in EBS National / Taxation “old rules” ledgers
• Output from RMCS drives EBS GL, Costing – “some assembly required”, discuss misc. integrations with OM, etc.
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Program Agenda
Evolving Practice
Integrating With EBS
Integrating with Project Accounting
1
2
3
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Performance Obligations in Projects
Recognize revenue on the satisfied performance obligation and comply with accounting standards
Derive accurate progress against the Performance obligation to obtain approval from customer
Capture and provide visibility to committed contractual Performance Obligations to drive accountability and delivery
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Impacts to Balance Sheet and Income Statement
Assets reduced when invoiced or payment is received for the goods and services provided
Receipt
Asset and liability created for amount of
goods and services promised
Contract
Liability reduced and revenue recognized when performance obligations satisfied
Fulfillment
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Define Performance Obligation (Projects)
• Attributes to Performance Obligations
Performance Obligation
Description Quantity Transaction
Price
Performance Obligation Number
Customer Name
Currency Standalone
Selling Price UOM
Agreement
Number
Expenditure Category
Expenditure Type
Revenue Category
Cost Rates and Mark up Percentage
Top Task
Number
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Progress of Performance Obligation
Revenue Method = Work • Typically Time and Material or Cost Plus
type projects
• Expenditure Type and Expenditure Category from Revenue Distribution mapped to the Performance Obligation
Revenue Method = Cost or Event
• Typically Fixed Bid Project
• Top Task from Revenue Distribution mapped to the Performance Obligation
Unit Rate Based / Schedule of Value
• SOV line mapped to Performance Obligation
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Progress of Performance Obligation
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• Revenue is based on the agreed progress against the Performance Obligation
• For bundled contracts, the value and revenue for individual Obligations are recognized considering the overall contract discount
• Rates, as adjusted for contract discount, from the Performance Obligation are applied to approved progress quantities to generate revenue
• Contract Asset and Liability balances are reflected as per ASC 606 and IFRS 15
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Recognize Revenue on Satisfied Performance Obligation
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Integration to Cloud Revenue Management
Integration to Cloud Revenue Management • Performance Obligation sent to Revenue
Management when project starts
• Progress sent on a periodic basis
• Revenue Management allocates and recognizes Revenue
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Resources
• Release Readiness: Revenue Management information on most recently released features documented in New Feature Summary and What’s New Documents
• Revenue Management Cloud Data Sheet
• Revenue Management Cloud User Guide
• My Oracle Support Article: Manage Project Revenue According to IFRS 15/ASC-606, Release 12.2 (Doc ID 2432035.1)
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Copyright © 2019, Oracle and/or its affiliates. All rights reserved. |
ASC 606 and IFRS 15 Compliance Automation The Standard’s Five Steps to Revenue
Third party and On Premise (EBS) Sales Cycle Data
Cloud Service order, billing, & fulfillment data
Cloud Service General Ledger
EBS General Ledger
ERP CLOUD
Revenue Management
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Copyright © 2019, Oracle and/or its affiliates. All rights reserved. |
ASC 606 and IFRS 15 Compliance Automation The Standard’s Five Steps to Revenue
Third party and On Premise (EBS) Sales Cycle Data
Cloud Service order, billing, & fulfillment data
Cloud Service General Ledger
EBS General Ledger
ERP CLOUD
Revenue Management
Questions?
Thank you for joining us today! Session ID: 11281
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