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Stay Ahead of the Curve

Prepare Now for the New Revenue Recognition Standard

by Don Sobczak, Principal, KPMG | insiderPROFILES, Volume 6, Issue 4

October 1, 2015

KPMG

Don Sobczak, a Principal in KPMG’s Advisory Services practice, looks at the ramifications of the new revenue recognition standards that will begin to take effect in January, 2016. The article outlines the steps needed to ensure compliance, beginning with a prompt completion of a revenue recognition assessment that examines all revenue-related processes and IT services, including any that are impacted by revenue calculations and recognition.

 

Now is the time to assess the impacts of the new revenue recognition standard released by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). Based on the newly updated and approved timeframe of compliance, companies that elect to report retrospectively will be required to dual report starting January 2016. Failure to understand the impact of this standard early on can severely hamper your ability to comply in a timely and efficient manner.

The Roadmap to Compliance

The first step toward compliance is the prompt completion of a revenue recognition assessment. It is recommended that the assessment begin with all revenue-related processes and IT services, including all the processes that are impacted by revenue calculations and recognition. You should distinguish between those steps that are executed outside of your main transactional application, either manually or through tools such as spreadsheets, and those steps that are executed within your core transactional application (namely, SAP ERP). Your assessment should also include other applications your organization uses for contract management, sales-order entry, and similar areas. If your landscape has multiple instances of ERP applications, your documentation should clearly articulate the difference in process, configuration, and customizations among systems.

The next step is to perform a fit/gap analysis of your systems against these new standards. This should include current revenue scenarios, integrated process changes, data elements, and transformations required to support all system and process changes under the new standards. If your current processes and systems require different functionality, you should consider whether the new SAP Revenue Accounting and Reporting functionality can satisfy the gaps you have identified.

Final Steps and Requirements

Throughout the assessment and analysis activities, all processes and future revenue requirements need to be fully identified and accounted for. This typically includes understanding how revenue should be calculated and recognized; how information is obtained for contract initiation, contract combination, and contract changes/deletions/renewals; details regarding reporting time, product shipments, customer invoicing, and processing of product returns; and dependencies on integrated process areas such as closing the books for sales and revenue or consolidating financial results. Within the SAP environment, attention should be focused on functionalities and data that reside in the various modules of SAP Customer Relationship Management, sales and distribution, materials management, project systems, financial accounting and controlling, SAP Revenue Accounting and Reporting, the SAP BusinessObjects Business Intelligence suite, SAP Business Warehouse, SAP Business Planning and Consolidation, SAP BusinessObjects BI solutions, industry solutions, classic/new or special ledger, COA structure, and company code configuration.

For more information, visit kpmg.com/us/sap.

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Dan Sobczak
Don Sobczak

Don Sobczak, Principal in KPMG's Advisory Services practice, has more than 12 years of experience leading large-scale global SAP business transformations across a variety of industries. Sobczak specializes in IT project delivery and management of SAP software implementations and infrastructure and leads KPMG's domestic Process and IT impacts for the Revenue Recognition changes.



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