revenue recognition: what you need to know and how to prepare
TRANSCRIPT
@PwC_LLP @Workday
Revenue RecognitionWhat You Need to Know and How to Prepare
Today’s Speakers
Workday Confidential
Arnold NelPartner, U.S. Workday
Leader —TICE Industries
Betsy BlandVice President,
Financial Management Products
Richa DubeyDirector, Revenue Product Strategy
Sheila BilbroSolution Consultant
Agenda
Workday Confidential
► 5-step Model Replaces Existing Guidance
► Workday Revenue Management
► Sneak Peak into Workday Functionality
► How Workday Supports the New Revenue Standards
► Workday Value
PwC
5-step model replaces existing guidance
Applying the new 5-step model requires more judgments and estimates
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5-step model
Step 1
Identify the contract
Step 2
Separate performance obligations
Step 3
Determine transaction price
Step 4
Allocate transaction price
Step 5
Recognize revenue
PwC
Illustrative timeline for new standard adoption
The standard is effective in 2018 for public companies. Companies will be able to elect to apply the final standard retrospectively or use a modified retrospective.
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A sample conversion timeline is provided for reference:
Q2 FY 14 May 31, 2014
Final standard issued
Phase 1 – Impact AssessmentAssess impact and determine strategy
Phase 2 – ConversionEstablish policy and prepare initial financial results
Phase 3 – EmbeddingEmbed as the primary revenue standard
Revenue Recognition Standard Transformation
Dual reporting period*Date of transition*
Q1 FY 16Jan 1, 2016
Reporting date*
Q1 FY 16 – Q4 FY 17Jan 1, 2016 – Dec 31, 2017
FY 18Dec 31, 2018
Current US
GAAP
New US
GAAP
Note:- *Assumes use of the retrospective transition approach
PwC
Advice for Companies Transition to the New Standard
1. Assess where you are1. Understand the impact of the guidelines on current processes, people, and technology and more
2. Understand contracts and revenue obligations
1. In many cases, the new standard will require additional system functionality or data requirements for effective implementation in 2018
3. Start the communication process and drafting of disclosures
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Transitioning to the New Standards: Implications and What to Consider
Implications What to Consider
The new standards will have systems and process change implications
How you sell may have accounting implications in the new standard. You will need to work together with sales, accounting, and operations to make policy decisions
More than revenue, the standards will have an impact on P&L and more
Consider broader financial and revenue management functionality
New standards are principles based rather than prescriptive
Ensure reporting capabilities are robust in order to handle greater dependency on underlying data
You will need to meet rigorous dual reporting and disclosure requirements
Setup an approach that will allow you to effectively maintain and close two sets of books for each month -end and year end period
Workday Financial Management
GLOBAL AT THE CORE
TECHNOLOGY FOUNDATIONSINGLE CODE LINE
MOBILE COLLABORATI ON
ACTIONABLE ANALYTICS
IN-MEMORY OBJECTS SECURITY
BUSINESS PROCESS FRAMEWORK
INTEGRATION CLOUD
REPORTING & ANALYTI CS
CONSUMER UI
PLANNING
ACCOUNTING
CASH
ASSETS
CONTRACTS
BILLINGREVENUE
PROJECTS
EXPENSES
PROCUREMENT
INVENTORY
GRANTS
INSIGHTS
CONSOLIDATION
Unified Revenue Solution
Total Revenue Management
Manage the entire contract-to-cash lifecycle for more efficient, accurate
processes and accounting results.
ContractCreation
Approvals Billing Amendment Renewals Audit and Reporting
Revenue Recognition
Transition to the New Revenue Standards with Workday
Workday Confidential
Model Policy Changes
• Create revenue rules based on the new revenue standards
• Create Alternate Contracts for those contracts with potential impact
• Run “what-if” scenarios to model what the impact of the new standard is on historical data
Dual Reporting
• Automatically generate revenue adjustment accounting entries based on Alternate Contracts
• Generate financial statements and disclosures
• Transition to the new revenue standard / policy
Assess
• Interpret the new standard and assess impact for your organization
• Review current active contracts and identify contracts with potential impact
• Define contract sets
Workday Scenario Tool for Transition
Scenario Tool DashboardA centralized dashboar d for key reports and tasks.
Set Up New Revenue RulesNew FV price, threshold, revenue recognition template
Create Alternate Contracts Different view of the contract for modeling
Run “What-If” Scenarios on Contracts
Review Results and RerunCompare the impact of the new standard on existing
contracts and rerun if required
Workday Revenue Management
UnifiedSolution
Industry Specific
Functionality
Complete Revenue
Management
Audit and Approvals Framework
Reporting and Analytics -
• Financials, HCM and Professional Services Automation (PSA)
• Full P&L support within one platform
• PSA – full back-office support for project operation, transaction based and for percent complete revenue recognition
• Software and subscription modeled business
• Support for revenue recognition and revenue allocation within core contract to cash process
• Scenario modeling to assess impact of policy changes and minimize the burden of dual reporting
• Changes to contracts, revenue schedules are tracked
• Always on audit enables saves time and cost spent on audit reporting
• Powered by Worktags– Accurate Insights into Key Revenue Questions
• Composite Reporting and analytics
Workday Value
Workday Confidential
Revenue Accountant CFO Auditors• Access to tools at their finger
tips to run different revenue scenarios based on different assumptions
• Result: Time savings, accuracy in data
• Provide information to help make executive decisions for the company.
• Results: Full visibility to the impact of the new standard.
• Full audit trail of the conversion and transition to the new standard.
• Result: easier, less time consuming audits
Result: Cost and Time Saver = $$ Savings!!
@PwC_LLP @Workday
Thank You!