IFRS 15 – Revenue from contracts with customers: SAP Revenue Accounting & Reporting (RAR) v. 1.2 & 1.3
The IFRS 15 standard is here—that means it‘s time for your company to become compliant! SAP Revenue Accounting and Reporting and IFRS 15 contains the foundations of the IFRS 15 standards, the usage and migration process of SAP RAR, and business cases from telecom and high-tech industries. In this sample, explore the foundations of IFRS, the impact of the new standards (IFRS 15), and SAP‘s answer: SAP RAR.
The IFRS 15 standard is here—is your company ready?
With less than seven months to go for most entities, the effective date IFRS 15/ ASC 606 is fast approaching. Calendar year companies will be required to apply the new standard for year ends beginning on January 1, 2018. Non-public companies applying US GAAP have an extra year with an effective date for annual periods beginning on or after December 16, 2018.
Most of the companies located in North America or Europe comply with generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS). Recently, the standards-setters developed new revenue-related standards (IFRS 15 and Accounting Standards Codification), which ensure clarity and transparency in reporting revenue. These new guidelines require a substantial change in the way currently revenue is being reported compared to the new revenue recognition standards. The main objective of the new standards (IFRS 15 and ASC 606) is to provide a single, comprehensive revenue recognition model for all customer contracts, improving comparability within and across industries and across capital markets.
Business Challenge: US-GAAP is more rule-based in nature, whereas IFRS is more principle-based. Currently, there are many key differences in the way revenue is recognized by businesses using one or the other sets of accounting standards. The implications of new guidelines are far broader than simply changing accounting and reporting methods, although that change itself is highly complex in nature. The new guidelines affect product offerings and how products are sold, related taxes, and commissions. Businesses need to go through large change management processes, both on the process side and the system side.
Businesses will also need to change their communication strategy with stakeholders, including suppliers, customers, and investors. Most organizations’ financial systems are not adequately equipped to handle transition or dual reporting requirements, which requires significant manual effort and time. It is important that organizations upgrade their systems in order to help automate the new revenue guidelines process. It’s important that businesses choose the right tool to automate revenue guidelines and perform a detailed vendor analysis in the market before finalizing the tool selection. They should consider the new accounting requirements (use cases, revenue scenarios), fit/gap analysis, data migration, and reporting requirements. It’s also important for businesses to assess the new revenue standards and develop an approach plan, and then convert that plan into a strategy to achieve the organization’s final goals.
SAP Revenue Accounting and Reporting (RAR) can align your financial reporting standards with this guide! We can help walk through the process for revenue recognition, dive into best practices for implementing SAP RAR, and then configure the solution. IrisLogic’s SAP RAR team has experts and consultants are available globally, whether it’s onsite, offsite, or mixed model – we have the right people and tools to help you. Our RAR team is headed by Ravdeep Bhasin, a seasoned expert in the area of IFRS 15 standards. We can do end to end project or may become part of your existing team.
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