Revenue Accounting IFRS 15 – The Clock is Ticking
The IFRS 15 doomsday clock is ticking! By January 1st 2018, IFRS 15 (or ASC 606 in the US) revenue accounting will come into effect globally. Most of the companies around the world will have to be ready by this time to report on this new standard, and provide the required details to their investors and auditors. And the regulation agencies are watching closely!
We have reached a critical time in the journey to IFRS 15 adoption as it takes about 18 months for any given company to handle such a significant accounting change. A phased approach to implementation with a two-year dual reporting period to get comfortable with the new standard is a best practice to consider.
I speak at many customer events around the world, and I always ask the people in the room: who has completed their work on the new revenue standard? I consistently get only a quarter of the room or less answering positively. So, here is my question to you: is your organization ready for IFRS 15?
To get started, companies first need to understand the accounting aspects: including a five-step process outlining how to recognize revenue under the new standard. This is done via a technical accounting assessment of the revenue contracts that fall under the new standard. Depending on the size and structure of the company, the technical assessment can take from several months to more than a year. Once companies are up to speed on the accounting piece, they need to start drilling into the broader organizational and system aspects, and figure out the best approach to implement a system capable of handling this change.
SAP has built a new state-of-the-art platform, SAP Revenue Accounting and Reporting (RAR), and when you couple that with S/4 Hana Finance, it is the most capable revenue accounting solution on the market. SAP has taken a leadership role and looked at this topic for several years now, fuelled by its 40+ years of experience with tens of thousands of customers, in all industries, running their finance on SAP systems. And the nice part? SAP Revenue Accounting and Reporting (RAR) is included with SAP maintenance with no additional license costs. We really wanted to offer this solution to our customers as a great value add.
We are working with a US Telco company that started with a pilot and performed 20 accounting scenarios over seven weeks using SAP Revenue Accounting and Reporting (RAR). Starting with our software in a pilot approach was a great best practice for them, as it forced them to have the right accounting conversation, at the right level of details, and at the right time. It made the whole process more productive and more efficient in getting the accounting assessment done. This customer has reached its final pilot, and is now in pre-production, before going live soon. Currently, their system is working with 17 integration points into SAP Revenue Accounting and Reporting (RAR) from both SAP and non-SAP systems.
As they are going through their pilot phase, a lot of customers realize that implementing a big change like revenue accounting offers the opportunity to take a step-back, re-think some of their other finance operations, and evolve their financial landscape into a modern digital core with S/4 HANA.
So don’t wait and get started today! Whatever your preferred scenario, we are here to assist you with our expertise and our state-of-the-art system!
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