2016 Revenue Recognition Transition Issues – ASC 606 Training
You can see all upcoming similar training events here – including other Revenue Recognition Accounting Conferences: Upcoming Training Conferences
Discussion Leader Info:
Pavel Katsiak presented Transition Issues: Systems and Processes on June 2, 2016 at the Revenue Recognition Accounting Conference in Philadelphia
. Pavel Katsiak is a Director at PWC and located in Washington DC.
-Pavel has served PwC audit and non audit clients for over 10 years.
-Pavel specializes in helping clients evaluate the accounting and reporting implications of the new revenue recognition standard.
-His combination of audit background and understanding of technical requirements of the new standard brings a practical perspective to the new revenue recognition implementation.
-Pavel’s clients include companies in industrial products, retail and consumer, technology, entertainment and media and services industries.
Executive Summary:
Katsiak began his presentation with an explanation that the effects of transition issues extend beyond accounting and continued by discussing an approach to implementation in three phases as listed below.
- Impact Assessment: Assess impact and determine strategy.
- Conversion: Establish policy and prepare initial financial results.
- Embedding: Embed as the primary revenue standard.
The speaker displayed implementation challenges including
- Centralized or dispersed business units
- Cross-functional communication and education
- Diversity of terms and conditions
- Tax implications
The speaker provided data supporting that in the Revenue Recognition Survey of 2015, 30% of respondents said their systems are centralized in one location; 21% said systems are somewhat centralized in a few locations. Of respondents who answered the question, 77% said they expect to make some to significant changes to IT or ERP systems. Furthermore, 84% believe implementing a parallel reporting system will take at least 6 months 59% expect they need a parallel reporting system and 87% of respondents anticipate some change in their internal controls 55% do not expect to make significant changes to their business models.
He discussed some changes that would need to be made as a result of the Revenue Recognition System such as
-New data may be needed from:
Ordering systems, Quoting systems, Contracting systems, Billing and invoicing systems, Cash and treasury processes, Licensing operations, and CRM.
Katsiak’s presentation displayed a list of expected master and transition data sets that will be impacted by topic 606 such as
- Volume licensing offer
- Contract (MPSA, PAR agreement)
- GL posting for revenue adjustments
The speaker spoke on the expected functionality of revenue automation capabilities for Topic 606. The expected functionalities include
- Analysis of historical sales data to determine SSP (stand alone selling price)
- Link related transactions into single contract
- Break out of performance obligations
- Booking of contract asset
- Relative allocation method
- Accounting for contract modifications
- Ability to “turn off” contingent revenue limitation
- Dual reporting
- Reporting based on adjusted revenue
Katsiak concluded his presentation with Build vs. Buy considerations of the Revenue System as listed below.
Build
-In house experience on systems, data, revenue
Transactions and expected results
-Requires in-house specialized revenue accounting
and technical expertise and skillsets to build a
scalable system and continually update to adapt to
changes in a timely manner
-Consider time required to build.
Buy
-Solution providers will need to learn client’s systems,
data and requirements, and may not gain full knowledge
-Experienced solution providers are subject matter
experts in technical revenue accounting and
related systems. They are expected to continue
investing in their solutions to improve.
-Consider availability and long term viability of
vendor solutions and their resources to implement
and support.
Revenue Recognition CPE Training Conference Recap
See upcoming training schedule here: 2016 CPE Schedule
Here is a recap of case study topics covered by Sean St. Germain and Ducky Min from Deloitte at the Dec 3-4 Revenue Recognition Accounting Update conference at the Hyatt Santa Clara.
On the first day of the event, PwC covered the new rules and how to implement the five steps detailed in the new standard. KPMG followed in the afternoon with a discussion of transition options and recommendations. An industry panel discussion provided a practical perspective on how others are going through the planning, preparation and implementation of the new rules. E&Y concluded the opening day with a look at SEC Comment Trends relating to revenue recognition.
Sean and Ducky opened up the second day of the conference with a series of case studies and how to account for the various scenarios in light of the new rules. Here are the case study topics that were covered in the 90 minute session:
Modification of a contract
Material-right renewal option
Sales to distributor (2 versions: with estimate of variable consideration constrained/not constrained)
Contract does not meet criteria to apply the new revenue model
Good or service is distinct
Estimating the transaction price
Implicit price concessions
Point in time or over time
Intellectual property
A four step technology case study
About the presenters:
Sean St. Germain
Senior Manager, Mergers, Acquisitions, & Divestitures, Deloitte & Touche LLP
Sean is a senior manager specializing in M&A deal management and financial diligence with over 10 years of public accounting experience. He has worked on numerous domestic and cross-border M&A transactions providing services to both private equity and strategic buyers for deal sizes ranging from $20 million to $19 billion. Sean’s experience has been focused primarily in the technology, media, and telecommunications industry.
Sean’s previous experience includes a three-year rotation in Deloitte’s National Office as a technical accounting resource and five years in Deloitte’s audit practice. During Sean’s time in Deloitte’s National Office (2010-2012), he focused a majority of his time leading Deloitte’s efforts related to the joint FASB/IASB revenue recognition project.
Sean holds a C.P.A. license in the State of Minnesota and California and is a member of the AICPA. Sean received a Bachelor’s degreein Finance and Accounting from Bethel University in St. Paul, MN.
Dukkyung (Ducky)Min
Senior Manager, Accounting & Reporting Transformation, Deloitte & Touche LLP
Ducky has over 12 years of experience providing assurance and advisory services around operational and technical accounting. Ducky provides assistance to mostly technology and consumer products companies in; (1) improving close processes; (2) implementing new GAAP; (3) technical accounting review (e.g. revenue recognition, share based payment, etc.); (4) transactional accounting (e.g. acquisition/carve-out/IPOs); and (4) SEC regulatory issues (e.g. IPOs, comment letter responses).
Previously, Ducky served five years in Deloitte’s audit practice; completed two years in M&A practice as part of the Management Development Program and subsequently completed a two year international assignment in Asia.
Ducky holds a C.P.A. license in the State of Virginia and California and is a member of the AICPA. She received a Bachelor of Science in Accounting from Georgetown University.
See upcoming training schedule here: 2016 CPE Schedule
ASC 606: Transition Options – New Revenue Recognition Rules
Dec 3-4 at Hyatt Santa Clara
Revenue Recognition Accounting Conference hosted by Accounting Conferences and Seminars LLC
See all upcoming Revenue Recognition Conferences and other CPE Training Seminars here: 2016 CPE Training Events
Led by KPMG’s Deglan Reager: Deglan is a Director in KPMG’s Accounting Advisory Services group with over 8 years of accounting experience. He specializes in on-call technical accounting advice, accounting change services, and buy side assistance. Prior to joining the San Francisco office of KPMG’s Accounting Advisory Services group in 2009, Deglan worked as an auditor in KPMG’s New York City Office and then as a staff member at the Financial Accounting Standards Board (FASB) with a focus on the Revenue Recognition project and FASB Statement No. 167—Amendments to FASB Interpretation No. 46(R).
and KPMG’s Adrien Vion: Adrien Vion is a Manager with KPMG finance management advisory services practice based out of San Francisco. He has over 5 years of experience in Europe (KPMG France) assisting clients in key business process analysis and transformation as part of the Management Consulting practice. He has a strong international experience by working in over 15 different countries for his clients. He also has advanced operational skills in SAP.
Adrien is a key member of the KPMG team developing the integrated Revenue Recognition service offering.
Deglan and Adrien covered the current timeline for adoption of ASC 606 – the new rules on Revenue Recognition and discussed four main ideas:
1. Industry-specific guidance is eliminated and replaced with a single model
2. Significant judgements and estimated are required in many circumstances
3. New business requirements to comply will require changes to systems
4. There is a cumulative effect or retrospective transition method for adopting the standard which will require parallel processing of revenue for a period of time
Deglan covered the three current transitions options: full retrospective-no practical expedients, retrospective with practical expedients, and cumulative effect.
The choice of option will have a significant effect on the plan for Deglan recommends entities begin to: perform a high level analysis to idenitfy potential drivers of changes, determine the contracts that need to be restated, initiate the design of a model to compare revenue under current GAAP to revenue under the new rules, consider putting together a sub-group within the project team to focus on transition option considerations and finally monitoring the activities of implementation groups established by the FASB.
Adrien covered the broad impact to organizations including the obvious impact to accounting policies, the impact on ERP systems and peripheral systems and interfaces, the governance organization changes and the financial and operational changes.
See all upcoming Revenue Recognition Conferences and other CPE Training Seminars here: 2016 CPE Training Events