1/21/2016

TheNewDeferredAccountingStandards
RARInAction

January 21, 2016

Ourspeakerstoday:
ChrisRitterhern
HansChristianMetz
JohnFroelich

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Welcome Todays Speakers

OurModeratortoday:
JohnFroelich

CHRIS RITTERHERN
DIRECTOR SOLUTION ARCHETICT

30+ yrs Business Systems experience

25+ yrs. Focused on Finance &
Operations Solutions
10+ Years at SAP

critterhern@bramasol.com

Hans Picture

HANS-CHRISTIAN METZ
SR. LEAD CONSULTANT & ARCHITECT

15+ years managing complex integration of accounting

and SAP ERP

hchristian@bramasol.com

Whoweare
Background
StrategicSAPRevRecConsultingPartner
SAPGoldPartnerfoundedin1996asthe

firstChannelPartnerinNorthAmerica
100+ConsultantswithanAverageof10+
yearsofexperience

Vision
ThoughtLeaderswithtightIntegrationtoSAP
TheLeadersinSAPRevenueRecognition
75%ofSAP1.0RampUps
TightLinkagestoSAPDevelopment
NumerousPOCs,workshopsandconsulting

projects

SupportandAMS
ServicesandSupportExperts
SAPCertifiedPCOESupport
- (24x7AMS&SupportCoverage)

SupportforECC,S/4HANA,andAnalytics

Transformation
FocusedonOfficeoftheCFOSolutions
TrustedSAPRampupCoaches
TestingofRevenueAccountingSoftware
WorkingdirectlywithRevenueRecognition

DevelopmentinGermany

RevenueRecognition
Whatyouwillsee?
#1HowRAROperates
#2Thenewbefore&after
businessprocess
#3Benefitstoyourcompany

TodayYouWillSeeTwoScenarios
#1HardwarewithService&Subscription
#2Intellectualpropertywithautogeneratedbillinglines

Akeymessage

Todaywedlikeyoutoseetheimpact
ofRARInAction&howithelpsyour
business

WhatisRevenueRecognition?

Revenueisrecognizedwhenacustomerobtainscontrolofa

goodorservice.
Acustomerobtainscontrolwhentheyhavetheabilityto

directtheuseofand/orobtainthebenefitsfromthegoodor
service.

NEWRevenueRecognitionAccountingandReporting
AffectingAllRevenueContracts(IFRS15,FAS201409)
FinalstandardpublishedMay2014

Effectivedatelatest2018/9*(early
adoptionpossibleforIFRSpreparers)

Newsingleprincipled5stepmodel
(SSP)forrecognizingrevenue

Identify the separate performance

obligations in the contract

- Disclosurechangesincludebothquantitative
andqualitativeinformationabouttheamount,
timing,anduncertaintyofrevenuefrom
contractswithcustomersandthesignificant
judgmentsused

Allcompanies(publicandprivate)willberequiredto
preparetheirrevenuecontractsnowtocomplywith
thisnewregulationby2018/9*

Identify the contract with the customer

4
5

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

*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.

WhatisaPOB?
POBDefined:
Underthenewregulation,ASC606,a
performanceobligationisdefinedasapromise
totransferagoodorservice.
Aperformanceobligationissomethingthatcan
beexplicitlystatedinthecontractoritcanbe
implied.

Scenario1 OurProductSellScenarioToday
Selling an inclusive 'Media Device' .
'Deal' includes the first six months of subscription which usually
cost $20 per month.
This means, that from a revenue recognition perspective, we
recognize
a) The actual value of the Media Device, in this case
when activated

RARVersion1.1beingused
inourAWSDemo&POC
Cloudenvironment

$199.00

b) The value of the Media Device is subtracted from $199

and the reminder is divided across 6 months and then
recognized on a time basis
Breakdown of that statement (by our convention):
End Media Device value for this 'deal'
($199 less subscription costs)
Final Media Service monthly value ($15 times 6 months)

$109.00
$90.00

SSP for Media Device when purchased on it's own

$200.00

% of
Bundle
62.50%

SSP for Media Service at $20 per month at six months (price
when purchased alone & not part of a bundle or a deal)

$120.00

37.50%

$74.63

Total

$320.00

100.00%

$199.00

Item (aka Material)

Recognized monthly subscription is $74.63 / 6 months:

SSP

RSP
$124.38

$12.44

RSP RelativeSellingPrice

FlowDiagram TransactionLayertoRAR

BramasolsDemoEnvironment AWS

SAP ECC
ver 6.0
EHP 7

SAP RAR
ver 1.1

SowhatdoesSAPRevenueAccountingLookLike

Scenario1 HardwarewithService&Subscription

Letstakeacloserlookatsomeofthe
numbers&screensthatwentbyduringour
livedemo..

TransactionalSalesContract:
Deviceincludes6
monthsofservice
subscription,whichis
valuedat$15/monthif
purchasedonitsown

UtilizingtheAutogeneratedInstallmentPlaninSAP

Contractsubscription
start/stopdates
BTW:Contractcanbe
lateramended&will
autoupdateRAR

Monthlysubscription
autogeneratedeach
onebecomesaPOB

TransactionSystemItemstoTransfertoRAR

Deviceplus6months
ofsubscription

RARContractCreatedbothIFRS&GAAP

RARContractRevenuePictureBeforeActivation

RARContractRevenuePictureAfterActivation

TransactionSystem GeneralLedgerPostingResults
ThenaRARsystemposting
runmakesthefollowing
adjustmentsautomatically
backtotheTransaction
systemGeneralLedger

RARPostingbackto
Transactionsystem

RARMirror Contract ByPOBType

Media Device
Monthly Subscription

Media Device

Monthly Subscription

ReconciliationAudit RevenueandG/L
Userscanlookbackandeasilyauditpostingissuesusingvarietyofcriteria

SAPRevenueAccountinginAction.

Scenario2
Intellectualpropertywithautogeneratedbillinglines

Scenario2 Intellectualpropertywithautogeneratedbillinglines
Inthisscenario,itwasagreed,byconventionthatmultipletermsforthe
sametitlewouldberepresentedontheirowncontractline.
Thisalsoallowedforlatereaseofchangeonshowdates&durationduring
theparticularviewingseason
Line Item# Item Description
1

Title1 A Great Movie

Title2 The Current Movie

3
4

Title2 The Current Movie

Title3 We're The Smith's
Title3 We're The Smith's

Term
Start

Term
End

3/1/15
8/1/14
6/1/16
1/1/14
9/17/16

2/29/16
7/31/15
5/31/18
8/17/14
10/31/16

Term Accounting
Months Basis Rule

12.0
12.0
24.0
7.0
3.0

TIME
TIME
TIME
TIME
TIME

List Price

Total SSP

POB
Lines

$1,000,000 $1,000,000
$900,000
$900,000
$1,800,000 $1,800,000
$250,000
$250,000
$250,000
$250,000

12
12
24
7
3

Total

58

BramasolsDemoEnvironment AWS

SAP ECC
ver 6.0
EHP 7
SAPLumiraCloud

SAP RAR
ver 1.1

SowhatdoesSAPRevenueAccountingLookLike

Scenario2
Intellectualpropertywithautogeneratedbillinglines

TransactionalSalesContract:
RARMirror Contracthas50+POBlines

Noticeonly5contractlines

RevenueContract QuickLook

RevenueContract RevenueScheduleinTotal
Recognizableaswemarked
thateligibletobebilled
(transferred)whenthe
contractwascreated

SoforScenario2wesaw:

ARARcontactof50+POBlinesautogenerated
Anexampleofunitpricingthatisbilledmonthlyasis
HowDashboardingcanhelpshowaveryclearRAR
revenuepicture betterinsighttotheprocess

Bramasol GeneralProofofConceptsSteps

Determinetheoverallimpacttoyourcompany
Quickcomparisontothestandard
Faststartinformativestyle,webelievethatknowledgeispower
Evaluatealternatives,pursuedesignthinking wherereasonable
NextSteps

BramasolsProofofConceptApproachforRevenueAccounting
Activity 1

Teammembers,keystakeholders,resourceavailability
EstablishPOCEnvironment&Access(Cloudaccelerationpossible)

Initiate PoC,
Scheduling, etc...

Activity 2

BusinessProcessReview(superset)
DepartmentsInvolved,EstablishWorkshopCycles

Confirm Overall
Requirements

Activity 3

Discusscurrentrevenuescenarios
IdentifyRARsolution
Process,Configuration,CustomRules

Business Process
Workshops

Workshop
Cycle
Activity 4

BP Deployment
Review workshop

Activity 5

Final
Documentation

BusinessProcessdocumentation
Finalanalysis
Roadmaptoproduction
Developfirstcutforproductionplans
ReviewoverallBusinessProcesslist
Evaluate&discussPOCresults

Workshops ExampleoftheProcess

Iterative
Approach

WhatWeLearnedToday
One.

SAP RAR Module is smoothly integrated

Two.

We can utilize RAR for different type of

business scenarios

Three.

Engage with a partner who knows how to

extend the paradigm better user
acceptance

ForKeyStakeholders

BusinessBenefits
ofthe
NewRevenue
Accounting

Insightsintotheimpact

Gaintransparencyrequirements

Ensurealignment

ForITManagers
Insightsintotheimpact
CommonPlatformwithknown
solution

UsingSAPs
newRAR
capability,
givesus
Leveragecontracts,
accountingpolicy,and
marketdataasinputs

Visibilityintorevenue
contractsexposure
Contractsummary
generationforAudits
Analyzeprofitabilityvia
SSP

Unifiedcollectionof
leasecontractdata

Thankyouforattending!
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