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ConfidentialThe New Revenue Standard is Here: Next StepsJeffrey Werner, Werner Consulting GroupSeptember 23, 2014 
© 2014 Tensoft All Rights Reserved. 1
Confidential 
Welcome to Today’s Event 
Caprice Murray, Tensoft 
© 2014 Tensoft All Rights Reserved. 2
3 
Confidential 
•Submit questions any time using the “Question and Answer”pane. 
•CPE certificates will be emailed to everyone who is eligible by end of business on Friday 9/26. 
•Submit questions after the webcast to Jeffrey Werner, wernerj@sbcglobal.net, or to Caprice Murray, caprice@tensoft.com. 
Webcast 
Briefing 
© 2014 Tensoft All Rights Reserved.
4 
Confidential 
Tensoft, Inc. 
●Business software solutions provider 
●Revenue and billing management for Technology Companies 
Tensoft RCM Product Line 
●Contract Billing Management (CBM) 
–Contract based customer management 
–Contract based revenue option 
●Revenue Recognition Management (RRM) 
–Sales contract creation and management 
–Revenue rules and delivery models 
–Workflow for sales contracts 
–Compliance Module for Fair Value management 
About Tensoft 
© 2014 Tensoft All Rights Reserved.
Confidential 
Tensoft RRM Process Flow 
© 2014 Tensoft All Rights Reserved. 
RevenueEngine 
Reporting and Analytics 
Revenue 
Rules 
Determined 
Valuation 
Sales 
Transaction 
Document 
Flow 
Revenue 
Sub-Ledger 
RCM Contract 
ERP Document 
Website or CRM 
To ERP
6 
Confidential 
Sales Contract (Agreement): 
●Rules Based Methodology 
–Document workflows 
–SKU Business Rules 
–Hold and approval options 
–Fair value allocation models 
●Agreement Management 
–Living, editable document 
–Separate from cash & A/R process 
–Updatable for fulfillment, change 
●Source Options 
–Agreement defined by go-to-market 
–Multiple integration models standard 
–Updates from appropriate source(s) 
Revenue Management 
Revenue Recognition: 
●Compute Process 
–Revenue agreement to date 
–Always self correcting 
–Available for review / edit prior to final 
–Multiple options to compute/review 
●Final Revenue 
–Finalize / post process 
–Revenue journal 
–Revenue history 
●Reporting and Analytics 
–Deferred revenue sub-ledgers 
–Revenue change analysis 
–Forecast deferred revenues 
–Excel-based reporting options 
© 2013 Tensoft All Rights Reserved.
ConfidentialToday’s Presenter: Jeffrey Werner, Werner Consulting Group 
© 2014 Tensoft All Rights Reserved. 7
8 
Agenda 
•Overview –Who, What, When, Where, Why 
•Process and Scope 
•Adoption Methods 
•Five New Principles of Revenue Recognition 
•Significant Changes to Revenue 
•Impact Assessment 
•Implementation Plan 
•Project Management
9 
New Revenue Standard 
Who Is Issued the Standard? 
–Jointly issued by the FASB (US) and IASB (Worldwide) 
–Will be part of US GAAP when effective 
–Will be part of IFRS when effective
10 
New Revenue Standard 
What Is the New Standard? 
ASU 2014-09 –Topic 606 
–150 page set of accounting standards for revenue recognition 
–350 pages Conforming Amendments to US GAAP 
–200 pages of background and Basis for Conclusions 
–Copies at FASB.org
11 
New Revenue Standard 
When Is the New Standard Effective? 
–Effective 2017 for public companies 
–Effective 2018 for non-public companies
12 
New Revenue Standard 
Where Will The New Standard Be Effective? 
–The new standard when effective will be required accounting: 
–In the US under US GAAP issued by the FASB 
–In Countries following IFRS 
•(more than 113 countries Worldwide)
13 
New Revenue Standard 
Why Is This Happening? 
–Part of ongoing process to align or “harmonize” accounting worldwide 
–To establish one comprehensive revenue recognition approach for all customer contracts 
–Remove current inconsistencies 
–Improve comparisons between companies 
–Provide more information and disclosures 
–Simplify accounting and guidance
14 
New Revenue Standard 
•Process 
–Years of discussions 
–Exposure Draft # 1 June 2010 
–Comment period closed October 2010 
–Exposure Draft # 2 November 2011 
–Second Comment period closed March 13, 2012 
–Project Update July 24, 2013 
–Issue final standard in Q2 2014 
–Effective Date January 2017 
–Transition Resource Group -TRG
15 
New Revenue Standard 
•Scope 
All Contracts with customers 
(except those covered by another rule Leases, Insurance and Financial Instruments) 
Year of adoption methods and disclosure 
No early adoption
16 
New Revenue Standard 
Retrospective adoption 
Requires comparable presentation 
2017 with 2015 and 2016 restated 
Simplified Transition Method 
Apply to all active contracts at transition date 
Cumulative effect of change in balance sheet 
Disclose amount of change each line item 
Explain difference between new and old in year of adoption (and quarters)
17 
New Revenue Standard 
Current Revenue Model 
•Four Principles of Revenue Recognition 
–Evidence of Arrangement 
–Fixed and Determinable Fee 
–Delivery 
–Collectability
18 
New Revenue Standard 
New Revenue Model 
Core Principle 
-“Recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services” 
-Five Steps to Apply Core Principle
19 
New Revenue Standard 
Five Steps to Revenue Recognition 
•Identify the Contract with Customer 
•Identify the Separate Performance Obligations 
•Determine Transaction Price 
•Allocate Transaction Price to Obligations 
•Recognize Revenue on Satisfaction of Performance Obligation
20 
New Revenue Standard 
Significant Changes to Revenue 
•Change your mind set 
•Principles instead of “rules” 
•Expectation and Estimates 
•New Vocabulary and Guidance 
•Read the Standard / Get Training
21 
New Revenue Standard 
Significant Changes to Revenue 
•Contingent Revenue / Unbilled 
•Stand Alone Selling Price Valuation 
•Bundles 
•Specific discounts and reductions 
•Cash Basis / Collectibility 
•Estimates vsFixed and Determinable
22 
New Revenue Standard 
Significant Changes to Revenue 
•Sell In vsSell Through 
•Point in Time vsOver Time 
•Time Value of Money 
•Software 
•Licenses
23 
New Revenue Standard 
Significant Changes to Revenue 
•Policies and Procedures 
•Internal Controls 
•Disclosures 
•Taxes 
•Timing 
•Apportionment 
•Transfer Pricing
24 
New Revenue Standard 
Impact Assessment 
•Determine Revenue Streams or Types 
•Analyze Current Deferrals 
•Determine Areas of Change
25 
New Revenue Standard 
Impact Assessment 
•Increases or Decreases in Revenue 
•Forecasting and Street Expectations 
•Accounting System Changes 
•ERP System 
•Revenue Module 
•Tracking Disclosures 
•Excel
26 
New Revenue Standard 
Implementation Plan 
•Determine Time Lines 
•Scope and Tasks 
•Project Management 
•Additional Resources
27 
New Revenue Standard 
Implementation Plan 
•Determine Impact on Marketing and Sales 
•Legal Contract Review 
•Debt Covenants 
•Revenue Sharing 
•Legal Terms 
•Compensation Plans 
•Training and Education
28 
New Revenue Standard 
Implementation Plan 
•Business Practices 
•Road Maps 
•Pricing and Product Marketing
29 
New Revenue Standard 
Implementation Plan 
•Adoption Method 
•Dual reporting 
•Restatement 
•Impact on Forecasting 
•Lost Revenue 
•Draft Disclosures and New Financial Statements
30 
New Revenue Standard 
Project Management 
•Assemble a Team 
•Finance 
•Accounting 
•HR 
•Sales 
•Legal 
•Tax 
•IT 
•Investor Relations 
•Board of Directors / Audit Committee
31 
New Revenue Standard 
Project Management 
•Steering Committee 
•Project Manager 
•Reporting Structure 
•Change Management
32 
New Revenue Standard 
What Are Companies Doing Now 
•Nothing 
•Education and Training 
•Pre-planning 
•High Level Impact Analysis 
•In Depth Impact Analysis 
•Contract Review 
•Tracking & Metrics 
•Testing 
•Hiring Resources
33 
Conclusion 
Revenue Recognition Resources 
•Auditor Revenue Recognition Guides and Updates 
•Auditor Revenue Recognition Whitepapers 
•Revenue Conferences, Webcasts and Classes 
•Transition Resource Group 
•AICPA 
•Journal of Accountancy July Issue 
•FASB website 
•SEC Filings 
•Webcasts 
•Web Searches
34 
Conclusion 
•Questions after class by email wernerj@sbcglobal.net
New Revenue Recognition StandardThanks for Joining Us today 
35

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The New Revenue Standard is Here: Next Steps

  • 1. ConfidentialThe New Revenue Standard is Here: Next StepsJeffrey Werner, Werner Consulting GroupSeptember 23, 2014 © 2014 Tensoft All Rights Reserved. 1
  • 2. Confidential Welcome to Today’s Event Caprice Murray, Tensoft © 2014 Tensoft All Rights Reserved. 2
  • 3. 3 Confidential •Submit questions any time using the “Question and Answer”pane. •CPE certificates will be emailed to everyone who is eligible by end of business on Friday 9/26. •Submit questions after the webcast to Jeffrey Werner, wernerj@sbcglobal.net, or to Caprice Murray, caprice@tensoft.com. Webcast Briefing © 2014 Tensoft All Rights Reserved.
  • 4. 4 Confidential Tensoft, Inc. ●Business software solutions provider ●Revenue and billing management for Technology Companies Tensoft RCM Product Line ●Contract Billing Management (CBM) –Contract based customer management –Contract based revenue option ●Revenue Recognition Management (RRM) –Sales contract creation and management –Revenue rules and delivery models –Workflow for sales contracts –Compliance Module for Fair Value management About Tensoft © 2014 Tensoft All Rights Reserved.
  • 5. Confidential Tensoft RRM Process Flow © 2014 Tensoft All Rights Reserved. RevenueEngine Reporting and Analytics Revenue Rules Determined Valuation Sales Transaction Document Flow Revenue Sub-Ledger RCM Contract ERP Document Website or CRM To ERP
  • 6. 6 Confidential Sales Contract (Agreement): ●Rules Based Methodology –Document workflows –SKU Business Rules –Hold and approval options –Fair value allocation models ●Agreement Management –Living, editable document –Separate from cash & A/R process –Updatable for fulfillment, change ●Source Options –Agreement defined by go-to-market –Multiple integration models standard –Updates from appropriate source(s) Revenue Management Revenue Recognition: ●Compute Process –Revenue agreement to date –Always self correcting –Available for review / edit prior to final –Multiple options to compute/review ●Final Revenue –Finalize / post process –Revenue journal –Revenue history ●Reporting and Analytics –Deferred revenue sub-ledgers –Revenue change analysis –Forecast deferred revenues –Excel-based reporting options © 2013 Tensoft All Rights Reserved.
  • 7. ConfidentialToday’s Presenter: Jeffrey Werner, Werner Consulting Group © 2014 Tensoft All Rights Reserved. 7
  • 8. 8 Agenda •Overview –Who, What, When, Where, Why •Process and Scope •Adoption Methods •Five New Principles of Revenue Recognition •Significant Changes to Revenue •Impact Assessment •Implementation Plan •Project Management
  • 9. 9 New Revenue Standard Who Is Issued the Standard? –Jointly issued by the FASB (US) and IASB (Worldwide) –Will be part of US GAAP when effective –Will be part of IFRS when effective
  • 10. 10 New Revenue Standard What Is the New Standard? ASU 2014-09 –Topic 606 –150 page set of accounting standards for revenue recognition –350 pages Conforming Amendments to US GAAP –200 pages of background and Basis for Conclusions –Copies at FASB.org
  • 11. 11 New Revenue Standard When Is the New Standard Effective? –Effective 2017 for public companies –Effective 2018 for non-public companies
  • 12. 12 New Revenue Standard Where Will The New Standard Be Effective? –The new standard when effective will be required accounting: –In the US under US GAAP issued by the FASB –In Countries following IFRS •(more than 113 countries Worldwide)
  • 13. 13 New Revenue Standard Why Is This Happening? –Part of ongoing process to align or “harmonize” accounting worldwide –To establish one comprehensive revenue recognition approach for all customer contracts –Remove current inconsistencies –Improve comparisons between companies –Provide more information and disclosures –Simplify accounting and guidance
  • 14. 14 New Revenue Standard •Process –Years of discussions –Exposure Draft # 1 June 2010 –Comment period closed October 2010 –Exposure Draft # 2 November 2011 –Second Comment period closed March 13, 2012 –Project Update July 24, 2013 –Issue final standard in Q2 2014 –Effective Date January 2017 –Transition Resource Group -TRG
  • 15. 15 New Revenue Standard •Scope All Contracts with customers (except those covered by another rule Leases, Insurance and Financial Instruments) Year of adoption methods and disclosure No early adoption
  • 16. 16 New Revenue Standard Retrospective adoption Requires comparable presentation 2017 with 2015 and 2016 restated Simplified Transition Method Apply to all active contracts at transition date Cumulative effect of change in balance sheet Disclose amount of change each line item Explain difference between new and old in year of adoption (and quarters)
  • 17. 17 New Revenue Standard Current Revenue Model •Four Principles of Revenue Recognition –Evidence of Arrangement –Fixed and Determinable Fee –Delivery –Collectability
  • 18. 18 New Revenue Standard New Revenue Model Core Principle -“Recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services” -Five Steps to Apply Core Principle
  • 19. 19 New Revenue Standard Five Steps to Revenue Recognition •Identify the Contract with Customer •Identify the Separate Performance Obligations •Determine Transaction Price •Allocate Transaction Price to Obligations •Recognize Revenue on Satisfaction of Performance Obligation
  • 20. 20 New Revenue Standard Significant Changes to Revenue •Change your mind set •Principles instead of “rules” •Expectation and Estimates •New Vocabulary and Guidance •Read the Standard / Get Training
  • 21. 21 New Revenue Standard Significant Changes to Revenue •Contingent Revenue / Unbilled •Stand Alone Selling Price Valuation •Bundles •Specific discounts and reductions •Cash Basis / Collectibility •Estimates vsFixed and Determinable
  • 22. 22 New Revenue Standard Significant Changes to Revenue •Sell In vsSell Through •Point in Time vsOver Time •Time Value of Money •Software •Licenses
  • 23. 23 New Revenue Standard Significant Changes to Revenue •Policies and Procedures •Internal Controls •Disclosures •Taxes •Timing •Apportionment •Transfer Pricing
  • 24. 24 New Revenue Standard Impact Assessment •Determine Revenue Streams or Types •Analyze Current Deferrals •Determine Areas of Change
  • 25. 25 New Revenue Standard Impact Assessment •Increases or Decreases in Revenue •Forecasting and Street Expectations •Accounting System Changes •ERP System •Revenue Module •Tracking Disclosures •Excel
  • 26. 26 New Revenue Standard Implementation Plan •Determine Time Lines •Scope and Tasks •Project Management •Additional Resources
  • 27. 27 New Revenue Standard Implementation Plan •Determine Impact on Marketing and Sales •Legal Contract Review •Debt Covenants •Revenue Sharing •Legal Terms •Compensation Plans •Training and Education
  • 28. 28 New Revenue Standard Implementation Plan •Business Practices •Road Maps •Pricing and Product Marketing
  • 29. 29 New Revenue Standard Implementation Plan •Adoption Method •Dual reporting •Restatement •Impact on Forecasting •Lost Revenue •Draft Disclosures and New Financial Statements
  • 30. 30 New Revenue Standard Project Management •Assemble a Team •Finance •Accounting •HR •Sales •Legal •Tax •IT •Investor Relations •Board of Directors / Audit Committee
  • 31. 31 New Revenue Standard Project Management •Steering Committee •Project Manager •Reporting Structure •Change Management
  • 32. 32 New Revenue Standard What Are Companies Doing Now •Nothing •Education and Training •Pre-planning •High Level Impact Analysis •In Depth Impact Analysis •Contract Review •Tracking & Metrics •Testing •Hiring Resources
  • 33. 33 Conclusion Revenue Recognition Resources •Auditor Revenue Recognition Guides and Updates •Auditor Revenue Recognition Whitepapers •Revenue Conferences, Webcasts and Classes •Transition Resource Group •AICPA •Journal of Accountancy July Issue •FASB website •SEC Filings •Webcasts •Web Searches
  • 34. 34 Conclusion •Questions after class by email wernerj@sbcglobal.net
  • 35. New Revenue Recognition StandardThanks for Joining Us today 35