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.