TEN REVPRO IMPLEMENTATION TAKEAWAYS

Presented By:

Adityavikram Toshniwal

Sondi Kri

TAKEAWAYS

Revenue Recognition for Extended Warranty

Netting Process

Milestone Billing without SO Linkage

Conditional Allocation

Revenue Recognition for Early Renewals

RC Grouping - Time & Amount

Apply Cost based on Flex

SO modification

System Calculated List Price

Revenue Acceleration

Revenue Recognition for Extended Warranty

Requirement• Extended warranty brought through bundle explosion of Hardware Line.

• Revenue for extended warranty to be booked only after expiry of the initial warranty period.

Way Out• Ratable Method Condensed

• POB Satisfaction Manual

• POB Expiry Contract Start Date + 365

Setup

RevPro is to Automate Revenue Accounting in all

scenarios

Netting Process

Unbilled Account and Deferred Account replaced with Contract Liability Account in ASC 606.

Contract Liability should be settled at the end of the reporting period.

Better presentation of accounts.

Compliance with ASC 606 Guidelines

Why?

At the end of the reporting period Contract Liability Account for unbilled revenue will be reclassified as Contract Asset Account

On opening of the next period, the reclassification entry for unbilled revenue will be reversed .

Number of entries passed to GL gets reduced drastically.

Implication?

Milestone Billing without SO Linkage

Business Case

• Entity provides a series of distinct goods and services, thus forming different POBs.

• Single invoice was released against a contract with multiple POBs.

Configuration Challenge

• Single invoice line cannot be linkedto multiple sales order lines.

• Where an invoice is brought with blank sales order line id reference, system will generate a SO on its own.

Solution for Original Line||Solution to ensure single effect||Solution for multiple Invoices

Arrangement View

Implementation requires thinking out of the Box.

Conditional Allocation

• SSP – Formula Based Calculation.

• Setup of Ceiling and Floor Percentage – 0% and 20% respectively.

• SSP Range setup while defining SSP Hierarchy in RC Grouping Rule:a. SP Within Range Selling Price.b. SP Above Range Selling Pricec. SP Below Range Mid Point

Configuration

Requirement

• Allocation is to be done only when the discount offered is greater that 20%

Revenue Recognition for Early Renewals

Entity sold oneyearsubscription.

Renewal ofsubscription wasentered intobefore theexpiry of theearlier one.

Revenue for therenewal to bebooked after expiryof the earliersubscription andequally over thetenure of the typeof subscription.

Data Augmentation:

1. Revenue start date= Expiry Date + 1.

2. Duration will bestamped as per thetype of subscriptionfrom the pre-defined list.

RC Grouping - Time & Amount

Requirement – RC Grouping based on the following criterions

Sr. No. Field Used Days / Amount Criteria

1 Product Family and Customer Number Same RC if within 90 Days.

2 High Value Transaction For amount over $35,000

RC Grouping Rule

Data Augmentation Rule 1

Data Augmentation Rule 2

Apply Commission based on FlexRequirements

Commission is a predefined percentage of Annual Contract Value brought from the source system.

Commission Cost to be applied on the parent and the child line created after the bundle explosion.

Design Challenge

Bundle only splits the Selling Price, List Price and Cost Price.

Stratification for cost is based on the salesperson and various other records, thus the cost formula cannot be

directly linked to the products.

Solution

The split percentage will be brought during bundle explosion on the child lines using a flex number field.

Data augmentation to update Annual Contract Value by multiplying it with the split percentage stored in flex

number field.

Data Augmentation is the new Customization

SO Modifications in RevPro

Case SO Full Invoice Partial Invoice

Full revenue released

Partial revenue released

SO gets updated

Case 1 - - - - Yes

Case 2 - - - Yes

Case 3 -

- No

Case 4 - -

- Yes

Case 5 -

- Yes

Case 6 - -

Yes if

SO>INV

Case 7 - -

No if

SO<INV

System Calculated List Price

Business Requirement

• Entity does not have list price for the Service Lines in the Revenue Contract, but allocates a sell price.

• The Service Line is distinct for hardware and software lines.

Configuration Challenge

• List price is required for allocation of SSP.

• System calculates the List Price after explosion of the Service Line into Service for Hardware and Service for Software.

Setup 1

Solution

Bundle explode the Service Line into specific Service for Hardware and Service for Software Lines.

Bundle explosion line will have records for the fixed percentage of the list price of the total hardware lines / software lines associated to the service coming in the revenue contract.

Using Customisation each service child line (Service for Hardware and Service for Software) will be assigned the related Hardware / Software associated to it.

Using Customisation a total of the list price of the associated Hardware / Software Lines in the same Revenue Contract will be stamped on the respective service line.

With Data Augmentation the percentage value brought in Step 2 will be multiplied to the Hardware value record stamped in Step 4 to get the List Price of the associated service line.

Setup 2

Setup 3

Setup 4

Setup 5

Transaction result

Example

Acceleration of Revenue recognition

01. Business Requirement

An organization is into rental and sale business for the same line of products.

A customer initially takes the product on rent, but before the expiry of the rental term buys the same product.

The rental POB should not further book revenue and the revenue for sale should be booked immediately.

02. Design Challenge

Set SSP for rental line to $0.

Extended list price for the sales line will be reduced by the amount of rental income.

Assumption - the grouping records for the rental and sale line should be the same and there is no other line in that RC.

03. Solution

The rental POB still has some unexpired period for which revenue has to be booked.

But since the product has been sold the rental line does not hold any value.

Solutions could be far but not impossible

CONSULTINGOur team of experts who has years of industry experience provide strategic advisory services.

IMPLEMENTATIONRich experience in implementing RevPro for Global Enterprises.

SUPPORTManaged services for Revenue Operations for large enterprise customers.

OUR TEAMWell qualified team of Chartered Accountants (CPA Equivalent) and Technology professionalsProficiency in ASC 605/97-2/08-1 and ASC 606/IFRS 15/NEW GAAP

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