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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.
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.
-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.
-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