How Can you Make Better Judgement Calls When it Comes to Revenue Recognition?

The effective date of the new revenue recognition guidance is, at long last, here. CFO Magazine’s recent article, How Risky Are New Revenue Recognition Rules?, says “at some point after that, we’ll begin to see whether the new standard’s principles-based methodology is working as intended.”

The article points out that there are some judgment calls that must be made when it comes to the new revenue recognition rules.

Elements of judgment reside in each step of the new standard’s five-step process, according to CFO, including:

Step 1: Identify the contract(s) with customers. The collectability of consideration in a transaction is a concept that requires judgment in both the current and new guidance. Under the new guidance, collectability will be addressed in the determination of whether a contract exists, rather than whether revenue can be recognized. While the concept of collectability is not new, the judgments used to assess it will now be necessary at the outset of the revenue recognition process.

Step 2: Identify the performance obligations within the contract(s). Identification of performance obligations will be less restrictive under the new guidance and, therefore, contracts may have fewer performance obligations to be accounted for separately. The determination of these performance obligations will also require increased application of judgment.

Step 3: Determine the transaction price. The transaction price under the contract(s) involves a number of judgments, including consideration of variable and non-cash factors. Under the new guidance, entities will determine variable consideration by estimating either the “expected” value or the most likely amount in a range of possible amounts. As variable consideration will be based on an estimate, the timing of revenue recognition may be accelerated upon implementation of the new standard as compared to the more formulaic recognition of multiple elements over time, as currently required.

Step 4: Allocate the transaction price to the performance obligations in the contract. To allocate an appropriate amount of consideration to each performance obligation, an entity will now determine the stand-alone price at the outset for the goods or services. As stand-alone selling prices can be calculated or estimated in numerous ways that may require significant judgment, revenue recognition may be accelerated under the new guidance, particularly when compared to the current allocation methods.

Step 5: Recognize revenue when (or as) a performance obligation is satisfied. Under the current guidance, the percentage-of-completion method is generally used when recognizing revenue for contracts. Under the new rules, revenue is recognized when, or as, control of the asset is transferred to the customer. The determination of when control is transferred is often a matter of judgment, and will require consideration of when obligations are satisfied.

How will you make judgment calls when it comes to these new rules?

U.S. filers are expected to adopt the new accounting standards their first reporting period after December 15, 2017. For most companies, financial statements released in 2018 will be the first in compliance with ASC 606. To ease the transition, the Boards allow filers to use practical expedients in their application of the new accounting standards and choose between two adoption methods (full- and modified-retrospective).

To learn more about the new standards, check out our ebook: Revenue Recognition Do’s and Don’ts.

Best regards,

Robbie Morrison
Chief Solution Strategist, SBS Group

About Robbie
Robbie Morrison has spent nearly 20 years helping customers build and deploy elegant technology and business solutions. From start-ups to enterprise-class organizations worldwide, his knowledge of the Microsoft Dynamics ecosystem and Robbie-2017products helps SBS Group customers maximize ROI on technology investments.

Today, Robbie serves SBS Group customers in his role as Chief Solution Strategist where he provides thought leadership and manages the development of B2B solutions. Robbie received his MBA from the University of Georgia, Terry College of Business.
https://www.linkedin.com/in/robbiemorrison

Is your Digital Transformation the Christmas present you thought you wanted and got, but it sucks?

Digital transformation is one of the hottest topics when it comes to IT lately. In a recent CIO article, 7 Digital Transformation Myths, several business and IT people were interviewed, including Dan Doggendorf, VP of business operations and CIO for the Dallas Stars NHL hockey team. He says to avoid a digital transformational fail, you should take the advice author Stephen Covey has about “beginning with the end in mind. Otherwise, you’re just spending money on new cool toys. It’s the Christmas present you thought you wanted and got, but it sucks.” 

Has this ever happened to you? You were dying for a Hatchimal but were disappointed after you opened it on Christmas morning? Ok, maybe not. Or the Xbox One X…ok, that sounds pretty awesome.

The article goes on to say that a successful digital transformation can deliver significant rewards. But these common misconceptions can undermine your company’s ability to achieve desired results. These are the most common myths:

Myth No. 1: Digital transformation is an IT function

I agree that this is a myth. We recommend that our clients involve more functional and operational business units than just IT in a digital transformation. To truly transform your business, you must have buy-in from all departments.

Myth No. 2: True transformation is a blue chip’s journey

We have solutions for businesses of all sizes and find that even the smallest company can successfully transform their business with Microsoft Dynamics.

Myth No. 3: Digital transformation is about reducing the workforce

People are nervous that they will be replaced by machines with all of the machine learning and IoT that’s out there now. But, as it says in the article, I think companies are seeing the opposite: The more automation and data analytics that organizations put in place, the more human beings are needed to drive the algorithms and understand what’s happening in complex buildings or manufacturing plants.

Myth No. 4. Digital transformation is all about the technology

The article says that a digital transformation is not just all about the technology, but invest[ing] in building the right culture, and also in the transformation of the IT function, including new skills and partnering opportunities.

This is where you must think about new and better ways to delight your customers. Microsoft Dynamics 365 for Sales and Customer Service empowers sales, marketing and customer service with insights to personalize relationships, predict customer needs, and increase sales.

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Myth No. 5: Executive buy-in is a sure thing

You can’t always count on executive buy-in, and if executives are not fully on board with your project, it won’t be successful. Involve executives in digital transformation meetings from the get-go.

Myth No. 6: Digital transformation brings IT-business harmony

It’s not always harmonious when business people and IT people are in the same room. That’s what we are here to help with. SBS Group has a streamlined approach that ensures everyone is operating from the same blueprint, helping you realize business value faster.

Myth No. 7. The digital journey ends at implementation

Often companies believe go-live is when their digital transformation ends, and this simply isn’t true. Without regular check-ups, training, and re-training, there is a danger of low user adoption and a wasted IT budget. SBS Group’s E3 system integrates strategic planning, ERP and CRM, Business Intelligence and Analytics together, enabling the entire organization to create, communicate, measure and manage plans, objectives, and initiatives at the organization, team, and individual level.

I hope that you don’t fall into the trap of these digital transformation myths this holiday season. Let us know if you have a concern about any of the seven above and we can help. Join us for one of our upcoming webcasts where we talk about how Dynamics 365 can help.

Best regards,

Robbie Morrison
Chief Solution Strategist, SBS Group

About Robbie
Robbie Morrison has spent nearly 20 years helping customers build and deploy elegant technology and business solutions. From start-ups to enterprise-class organizations worldwide, his knowledge of the Microsoft Dynamics ecosystem and Robbie-2017products helps SBS Group customers maximize ROI on technology investments.

Today, Robbie serves SBS Group customers in his role as Chief Solution Strategist where he provides thought leadership and manages the development of B2B solutions. Robbie received his MBA from the University of Georgia, Terry College of Business.
https://www.linkedin.com/in/robbiemorrison

 

ASC 606 and IFRS 15: Are you Ready for New Revenue Recognition Rules?

We don’t want to add more to your to do list as things get busy around the holidays, but this is important! By now you’ve heard about the new rules governing revenue recognition for companies that will go into effect on January 1, 2018 for public companies, and January 1, 2019 for private firms. To recap, listen in to our podcast where I speak with Microsoft about the details.

ASC606 Overview

The Accounting Standard Codification 606, or ASC 606, made its debut in May 2014. It is an industry-neutral revenue recognition model designed to increase financial statement comparability among companies and industries. The objective is to decrease complexity involved with the current models for revenue recognition.

As a result, the new unit of account for revenue recognition is the obligation of a good or a service at the time it is delivered.

The Financial Accounting Standards Board (FASB), which administers Generally Accepted Accounting Principles in the U.S. (US-GAAP) has issued ASC 606, and the International Accounting Standards Board (IASB), which administers International Financial Reporting Standards (IFRS) used in most other countries, has issued IFRS 15. Both will enforce similar, fundamental changes to the revenue recognition process for any company that depends on complex contracts in their dealings with customers.

How do I know if my company will be impacted by ASC 606 and IFRS 15?

Businesses that have multiple components (e.g., product, services, warranties, etc.) in a single contract are the most impacted. If your firm permits changes to active contracts (e.g., adding a sports package to your cable TV contract), they are impacted. If the timing of when your firm pays commissions differs from when the products and services are delivered, then your firm is impacted. Cellular phone companies, software firms and many other kinds of companies will be impacted – some far more so than others.

 

 

Not Managed by Microsoft Dynamics out of the Box

Microsoft Dynamics does not manage these new standards out of the box. Companies running Dynamics GP, NAV, AX, or 365, must take all of their revenue outside ERP, process these complex calculations to figure out what they can recognize today versus what is deferred, and then bring those back in as manual journal entries. Before you start using Excel for this, consider using AXIO for Enterprise Firms, and Progressus for Small to Medium-sized Firms in addition to Microsoft Dynamics.

We wish you the best of luck with these new standards. Please let us know if you have any questions, and Happy Thanksgiving!

Best regards,

Robbie Morrison
Chief Solution Strategist, SBS Group

About Robbie
Robbie Morrison has spent nearly 20 years helping customers build and deploy elegant technology and business solutions.  From start-ups to enterprise-class organizations worldwide, his knowledge of the Microsoft Dynamics ecosystem and Robbie-2017products helps SBS Group customers maximize ROI on technology investments.

Today, Robbie serves SBS Group customers in his role as Chief Solution Strategist where he provides thought leadership and manages the development of B2B solutions.  Robbie received his MBA from the University of Georgia, Terry College of Business.
https://www.linkedin.com/in/robbiemorrison

 

Migration is Not Just for Birds: 5 Reasons to Migrate from PeopleSoft to Dynamics 365

It’s hard to believe that it has been 14 years since Oracle acquired PeopleSoft. Since then, PeopleSoft customers made the choice to stay with Oracle or move to a competing cloud alternative – but some companies are still using PeopleSoft. Are you one of them?

Support Until 2020

The support extension provided by Oracle through 2020 cannot hide the fact that PeopleSoft is mainly based on an architecture developed a couple of decades ago. The majority of PeopleSoft customers will have to determine whether they are well served by a product whose data design harks back to the mainframe.

Sticky ERP

Why do companies stick with PeopleSoft or other legacy products? That’s a good question. It may be because enterprise software is particularly sticky. Companies don’t change their ERP systems because the number of enterprise users are in the thousands, requirements are complex, implementation takes longer and costs are much higher. Therefore, expecting hundreds of large global companies to switch overnight to a new ERP system was never realistic. One thing is clear: doing nothing will become increasingly costly and will adversely affect your business.

Oracle Difficult to Implement

PeopleSoft customers can migrate to an Oracle product, and there is a popular misconception that it’s easy for PeopleSoft customers to migrate, but it’s simply not true. PeopleSoft and Oracle are based on radically different architectures and deployment models, and implementation can be costly and time-consuming.

Five Reasons PeopleSoft Customers Should Migrate to Microsoft Dynamics 365

  1. Easy to Use and Maintain

    Microsoft Dynamics 365 for Finance and Operations, Enterprise, (formerly Microsoft Dynamics AX),  offers a rich array of functionality to serve the needs of a wide variety of enterprise companies in a variety of industries. Built using industry-standard tools and database, Microsoft Dynamics 365 is easy to implement and maintain.

  2. Price and Total Cost of Ownership

    PeopleSoft is costly to maintain. Microsoft Dynamics 365 is less expensive for initial licensing, implementation, and on-going maintenance. It is a better value proposition overall, and chances are it integrates with a lot of your other existing systems.

  3. Increased Productivity

    Dynamics 365 is designed to work like Excel and Outlook. With the vast array of open database tools from Microsoft and a host of other sources, Microsoft Dynamics 365 data can be readily queried, mined, extracted and interfaced with analytical applications, trading partner systems, third party applications, and productivity tools.

    The Microsoft Dynamics 365 user interface is role-based, meaning each user has a home screen that is tailored to provide easy access to the activities and functions that they use every day – boosting productivity.

  4. Cloud Services

    Microsoft Dynamics 365 allows you to take advantage of cloud services, scale globally, run agile operations and connect employees by enabling real-time access to insights on any device.

  5. You’ll love the Human Capital Management

    Fans of PeopleSoft love it’s human capital management (HCM) capabilities. Well, I’m here to tell you that the HCM functionality within Dynamics 365 is stellar, and getting better all of the time. Dynamics 365 for Talent enables exceptional experiences across employee attraction, engagement, development, and retention.

The time is now to migrate to a less expensive, easy to use system that will have your users singing its praises. Let me know if you have any questions about a migration to Microsoft Dynamics 365 from PeopleSoft or another legacy product.

Best regards,

Robbie Morrison
Chief Solution Strategist, SBS Group

About Robbie
Robbie Morrison has spent nearly 20 years helping customers build and deploy elegant technology and business solutions.  From start-ups to enterprise-class organizations worldwide, his knowledge of the Microsoft Dynamics ecosystem and Robbie-2017products helps SBS Group customers maximize ROI on technology investments.

Today, Robbie serves SBS Group customers in his role as Chief Solution Strategist where he provides thought leadership and manages the development of B2B solutions.  Robbie received his MBA from the University of Georgia, Terry College of Business.
https://www.linkedin.com/in/robbiemorrison

What Additional Project-driven Solutions can Strengthen your Microsoft Investment?

You’ve already made quite an investment in Microsoft technology. And it can be confusing to determine what else works for service and project-driven company like yours. To accelerate your digital transformation, you need a new type of business application. One that breaks down the silos between CRM and ERP, that’s powered by data and intelligence, and helps capture new business opportunities.

In our webcast last week, we covered 10-12 different Microsoft software solutions that can strengthen or round out your Microsoft solutions. We talked about a few different ERP options as well as small and large project management solutions and some really cool apps included with Office 365.

We help you determine how to meet the unique needs of your organization with a modern business platform that makes it easy to tailor and extend Dynamics 365 applications—with little to no code development. Quickly build apps, automate workflows, and bring additional data insight into your business with the Microsoft business application platform.

If your company provides professional services and relies on delivering successful, profitable projects, then you should check out the recording.

Here are a few products and tools you can expect to see:

* Microsoft ERP Comparison: Dynamics 365, Dynamics SL and Dynamics NAV

* Microsoft CRM and PSA Simplified: Dynamics 365 for Sales and Project Service Automation

* Microsoft Office 365 Hidden Gems: Microsoft Planner, Microsoft Project, Microsoft Teams, SharePoint and Yammer

Don’t worry. We didn’t forget Excel…we know how much you love it!

If you thought Excel was the only tool in the Microsoft arsenal capable of managing projects, you’re going to be surprised.

Recorded Webcast: Microsoft Mash-Up

This is the second in a series of webcasts targeting project-driven companies. This  1-hour recorded webcast pulls a variety of solutions together for project-driven companies, including ERP, Sales, Marketing, Project Management and Business Productivity. Check out upcoming events.

In our recorded webcast, we demonstrate how our clients are utilizing multiple Microsoft solutions to improve project profitability, employee productivity and customer engagement…without breaking the bank. Let me know what you think about the webcast, and send any questions that you may have my way.

Best regards,

Robbie Morrison
Chief Solution Strategist, SBS Group

About Robbie
Robbie Morrison has spent nearly 20 years helping customers build and deploy elegant technology and business solutions.  From start-ups to enterprise-class organizations worldwide, his knowledge of the Microsoft Dynamics ecosystem and Robbie-2017products helps SBS Group customers maximize ROI on technology investments.

Today, Robbie serves SBS Group customers in his role as Chief Solution Strategist where he provides thought leadership and manages the development of B2B solutions.  Robbie received his MBA from the University of Georgia, Terry College of Business.
https://www.linkedin.com/in/robbiemorrison

 

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