Revenue changes are on the way. Are you ready?By Trevor Paulauskas, SAP Principal Consultant, Financial Management on
What are the upcoming changes to Accounting Standard IFRS15 ?
Accounting Standard IFRS15 changes will impact organisations across a wide variety of sectors. Due to be applied from 1 January 2018, the new accounting standards will affect the way companies recognise revenue and necessitate changes to accounting and reporting processes.
All companies, particularly those in the telecommunications, technology and utilities sectors, will experience significant changes to the way their P&L, operations, pricing and marketing activities operate. Both public and private companies will be required to prepare their revenue contracts to comply with the new regulation.
A simple example to explain how the new rules affect existing revenue recognition practices would be a telecommunications company selling a handset and service contract to a customer. Currently, the company spreads the revenue from the sale of the handset and the monthly support over the term of the contract. The new regulations stipulate that the revenue of the handset should be recognised upfront. That immediately changes the way revenue is reported in the first period of the contract being taken up.
This is a very common scenario for any high-tech company, where there is a hardware component plus a period of monthly service or support included in the contract.
SAP Revenue Recognition Accounting and Reporting (RAR)
SAP has released the Revenue Recognition Accounting and Reporting (RAR) add-on to assist customers in meeting the new legal requirements. The RAR solution is available for free (providing the system requirements are met), but to get it up and running correctly requires planning and SAP RAR finance expertise. The companies that will benefit most from it are those with significant volumes of contracted revenue.
Oxygen's SAP RAR Readiness Assessment Service
We highly recommend all our customers consult their auditors/external accountants to ensure they understand the new rules and agree on a compliance approach. Once that is done, we offer a SAP RAR Readiness Assessment service that helps you ascertain whether you need the SAP RAR add-on.
Each assessment is tailored to your organisation’s specific needs. The duration of the assessment ranges from two to three weeks depending on the engagement scope.
During the assessment, we conduct workshops with key stakeholders in your organisation, leverage any current work-to-date and apply sizing tools and lessons gained from prior SAP RAR engagements to determine your optimal deployment and migration approach. The assessment provides the foundation for a Proof of Concept RAR project.
Enquire below for more information on the changes to Accounting Standard IFRS15 and how Oxygen’s SAP RAR Readiness Assessment Service can assist you in getting ready.
Contact us below for access to our webinar recording exploring these changes. A deep-dive into the new rules for recording and reporting of revenue and associated expenditure and what that means for your business.