Organization must keep pace with new recurring revenue models while complying with tremendous change brought on by the new revenue recognition standard embodied in IFRS15 / ASC606. Companies who want to be successful in overcoming revenue recognition challenges should be proactive and start implementing a plan for ASC 606 immediately. Public companies must adopt the new standard for periods starting after Dec. 2017. Private companies must adopt for periods starting after Dec. 2018. There is a lot of work to be done.
On May 18th, Softrax and Aria hosted a Revenue Recognition webinar to help organizations understand what needs to be done well ahead of the ASC 606 deadline and specifically to discuss the pitfalls in adopting the full retrospective method well into the dual reporting term. Companies that follow this path will have to perform a “lookback” to prior dualities in order to dual report. In many situations this lookback can be extremely complicated. Many ERP platforms are unable to handle the new revenue recognition standards. In this webinar, we also discuss the new technologies available to help organization prepare for the future, and ensure compliance, while avoiding a costly rip and replace of existing infrastructure.
Below, Tom Zauli, Vice President of Marketing and Sales at Softrax and David Dipiano, Sr. Solutions Architect, from Aria answer some of the top questions raised by webinar participants:
Q: My ERP can handle reoccurring revenue – why shouldn’t I use it?
A: We hear this quite a bit with prospects and existing customers. We are not suggesting that ERP solutions can’t handle recurring revenue or some of the new standard. However, it is often the case that expensive customization is required to completely support these efforts and, unfortunately, with this customization there is typically a tremendous penalty in your ability to report, support for audit, and in compliance and controls. It’s important to think about these value/cost trade-offs. We are finding a lot of people out there who realize the value of keeping all processing within the context of out of the box functionality. Our modules are designed specifically to work with existing ERP to accomplish this.
Q: What if I’m already running part of my business on IFRS and one under US GAAP. Am I able to track both of these within the revenue subledger?
A: The new guidance requires companies to cover, at minimum, two sets of revenue policies. We support, not only this requirement, but an ability to support any multiple of books in accounting. We have clients deployed or deploying right now running GAAP, IAS-18 and the new standard in separate books and with plans to run other books to support additional what-if analysis and non-GAAP analysis.
Q: What is the impact to audit in leveraging a revenue subledger?
A: The impact can be extremely positive, not only in auditing the processing of transactional data, but also in tracking changes made to the one or more revenue policies configured within the system. We track every change and what the change was. Including who made the change and when the change was made. We have a full audit trail which provides our clients a complete before and after picture of the transaction or policy.
Topics: Revenue Recognition