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Revenue Management Cloud Service. Highlights and Customer Adoption [CON8402]. Tapomoy Dey Senior Director, Financials Development. Agenda. Why Revenue Management Solution Footprint Solution Deep Dive Customer Traction Converged Revenue Standards (IFRS 15/Topic 606) Q&A.

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Revenue management cloud service

Oracle Confidential – Internal/Restricted/Highly Restricted


Revenue management cloud service

Revenue Management Cloud Service

Highlights and Customer Adoption [CON8402]

Tapomoy DeySenior Director, Financials Development


Agenda

Agenda

  • Why Revenue Management

  • Solution Footprint

  • Solution Deep Dive

  • Customer Traction

  • Converged Revenue Standards (IFRS 15/Topic 606)

  • Q&A


Revenue management cloud service

  • Why Revenue Management The Business Challenges: Compliance, Integration, and Automation

  • Pressure to comply

    • US GAAP Current Guidance ASC/ASU (SOP 97-2, EITF-08, etc.)

    • Auditable Transactions

  • Many sources of truth

    • Spreadsheets

    • 3rd Party Bolt-On’s

  • Demand for automation

    • Manual processes for key revenue recognition activities slow down the period close


Revenue management cloud service

  • Why Revenue Management Use Case: A Software Contract

Revenue Reallocation

Software License

TPE

VSOE

ESP

Selling

Adjusted

Software License

Support

Consulting

100

20

80

98

26

76

Customer Bill

Software License

Support

Consulting

100

20

80

Support

200

200

Total

Revenue Schedule

200

Total

Period I

Period II

Period III

Consulting

Software License

Support

Consulting

98.00

8.66

16.00

0.00

8.67

20.00

0.00

8.67

40.00

122.66

28.67

48.67

Total


Agenda1

Agenda

  • Why Revenue Management?

  • Solution Footprint

  • Solution Deep Dive

  • Customer Traction

  • Converged Revenue Standards (IFRS 15/Topic 606)

  • Q&A


Revenue management cloud service

  • Solution FootprintCentralized, Automated Revenue Management Cloud Service

Revenue Sources

Automated Compliance

Actionable Analytics and Reporting

Centralized workarea

Spreadsheet Integration

Reference data

REVENUE MANAGEMENT

Revenue accounting


Revenue management cloud service co existence functional architecture

Revenue Management Cloud Service Co-Existence Functional Architecture

3rd Party

EBS Accounts Receivable

EBS Order Management

EBS Projects

EBS Service Contracts

Revenue Events Extracted via Delivered Source Views

Revenue Management

Create Schedules

Manage Compliance

Create Accounting

Audit & Analyze

  • Separate revenue from billing

  • Create ratable, immediate, and deferred revenue schedules

  • Generate revenue and deferred revenue entries

  • Automatically create compliance adjustment entries

  • Calculate and manage Fair Market Value (FMV)

  • Support Multiple Element Arrangements (MEA)

  • Seeded revenue reports for compliance reviews and audit

  • Ad hoc reporting layer

Customer Acceptance

Payment

Revenue

Accounting

EBS Accounts Receivable

EBS Costing

General Ledger

EBS Order Management


Agenda2

Agenda

  • Why Revenue Management?

  • Solution Footprint

  • Solution Deep Dive

  • Customer Traction

  • Converged Revenue Standards (IFRS 15/Topic 606)

  • Q&A


Revenue management cloud service

  • Revenue Management Cloud ServiceKey Business Challenges Addressed

AUTOMATION

Automation of contract identification, fair value price and compliance adjustments

ACCURACY

Centralized repository for reporting and accounting

COMPLIANCE

Audit trails and approvals ensure accurate revenue processing


Revenue management cloud service

  • Key Business Challenges AddressedDemand for Automation

  • Calculate and Manage Fair Market Value

  • Automatically groups stand alone sales based on user defined pricing dimensions

  • Supports multiple representations of fair market value

Demand for

Automation

  • Identify Contracts

  • Automatically identifies elements as part of a Multiple Element Arrangement (MEA)

  • Supports cross application and cross document MEA’s

Automation of contract identification, fair market value and compliance adjustments

  • Allocate Revenue

    • Automatic validation of compliance with fair market value

  • Creates adjustments based on residual, relative or two-step method


Revenue management cloud service

  • Calculate and Manage Fair Market Value

  • Support VSOE TPE, and ESP

Establish VSOE Value


Revenue management cloud service

Calculate & Manage Fair Market Value

Review & Establish VSOE Values

  • Access to Bell Curve & Trend Graph and Underlying Standalone Sales


Revenue management cloud service

Identify ContractsAutomate identification of Multiple Element Arrangements

Identification Rules

3 Sources

Line 1: Service Contracts

Line 3: Order Management


Revenue management cloud service

Allocate RevenueEnsure Appropriate Allocation Treatment

FMV Ranges

Adjusted Revenue

Carved Amounts


Revenue management cloud service

  • Key Business Challenges AddressedMany Sources of Thruth

Many

Sources of Truth

  • Separate Revenue from Billing

  • Revenue document consists of line(s) from a source document and encompasses the revenue timing and amount

  • Automatically assign contingencies to defer and recognize when appropriate

  • Generate accounting entries

Centralized repository for reporting and accounting

  • Adjust Revenue

  • Revenue allocations automatically calculated, accounted and visible on the Revenue Document

  • Schedule, unschedule, add and expire contingencies when necessary

  • Manage Revenue

    • Workarea provides centralized view of revenue tasks and status

    • Central reporting platform for all revenue processing


Revenue management cloud service

Separate Revenue from BillingRevenue Document Captures Key Revenue Processing

New Internal Document

Source Info

Revenue Scheduling


Revenue management cloud service

Adjust RevenueEnsure Accurate Revenue Accounting

Document Amounts

Associated MEA

Selling Price vs. Revenue Price


Revenue management cloud service

Adjust RevenueProcess Revenue Adjustments in Mass

Robust Search

Multiple Actions

Full History


Revenue management cloud service

Manage RevenueImmediate and Actionable Access to Revenue Transactions

Take Immediate Action

Immediate Notification


Manage revenue analytics and tools

Manage Revenue Analytics and Tools

  • Pre-seeded Revenue Forecast Report by:

  • Customer

  • Periods

  • Products

  • Sales Rep

  • Pre-defined Oracle Transactional Business Intelligence Subject Areas :

  • Fair Market Value

  • MEA Carve-out

  • Revenue Recognition

  • Source Documents


Revenue management cloud service

  • Key Business Challenges AddressedPressure to Comply

Pressure to Comply

  • Audit Revenue Transactions

  • Understand all actions performed both by the system as well as the user

  • Full audit trail provided when user overrides system derived calculations

Audit trails and approvals ensure accurate revenue processing

  • Approve Revenue Transactions

  • Require approvals and research to ensure appropriate compliance handling

  • Process exceptions and adjustments with full audit trail capability

  • Comply with Accounting Guidance

    • Supports complex US GAAP revenue requirements


Revenue management cloud service

Audit Revenue TransactionsAdjustment History Tracks all Actions Performed (MEA)

Link to Revenue Doc

Each Adjustment Tracked Separately


Revenue management cloud service

Audit Revenue TransactionsAdjustment History Tracks all Actions Performed (Revenue Doc)

All Actions on the Revenue Document are Displayed


Revenue management cloud service

Approve Revenue TransactionsProactively Manage Compliance Approvals

Fair Value Approvals

MEA Approvals


Revenue management cloud service

Comply with Accounting GuidanceMeet Strict Revenue Accounting Requirements

Displays how Adjustment Amounts were Calculated

Compliance Details


Comply with accounting guidance prepackaged reconciliation reports

Comply with Accounting Guidance Prepackaged Reconciliation Reports

  • Makes it easier to reconcile and validate your revenue and deferred revenue numbers with two pre-built interactive Business Intelligence Publisher (BIP) reports

  • Billing and Revenue Comparison Report

  • Supports Customer Level Comparison

    • Net Revenue (Revenue Minus Net Billing)

    • Deferred and Recognize Revenue

    • Net Billing to Revenue Differences

  • Offers drill to underlying MEA and Revenue Document detail

    • Revenue Management Reconciliation Report

  • Compares Revenue and Deferred Revenue Balances in Revenue Management and General Ledger

  • Identifies Activities to enable reconciliation

  • Offers drill to underlying activity and journal detail


Comply with accounting guidance audit and analysis tools

Comply with Accounting Guidance Audit and Analysis Tools

  • Offers pre-defined Revenue Management specific Subject Areas and standard reports to analyze and audit:

    • Fair Market Value

    • MEA Carve-out

    • Revenue Recognition

    • Source Documents

  • Increase your accuracy and efficiency in auditing and analysis of revenue related activities by:

    • Centralizing your revenue-related data into a single repository

    • Jump starting your analysis and auditing with standard reports

    • Creating your own custom reports using a robust platform and revenue specific subject areas


Agenda3

Agenda

  • Why Revenue Management?

  • Solution Footprint

  • Solution Deep Dive

  • Customer Traction

  • Converged Revenue Standards (IFRS 15/Topic 606)

  • Q&A


Revenue management cloud service1

Revenue Management Cloud Service

21 Customersprovided development and design feedback

Generally AvailableRelease 8

RevenueManagement

7 Usability sessions

Week Long

validation session

Over 3,000 hours testing


Revenue management cloud service adoption

Revenue Management Cloud Service Adoption


Revenue management cloud service

Revenue ManagementQuotes from Hands-on Validation Session

“Ability to drill from high level Fair Value information to the details with one click adds tremendous value for us.”

“The workarea is great. Having all the information pushed to the users for action is terrific.”

“We really liked the flexibility for Multiple Element arrangement identification.”

“We love the spreadsheet integration, this is key for us.”


Agenda4

Agenda

  • Why Revenue Management?

  • Solution Footprint

  • Solution Deep Dive

  • Customer Traction

  • Converged Revenue Standards (IFRS 15/Topic 606)

  • Q&A


Converged accounting standards timeline

Converged Accounting Standards Timeline

  • The new Revenue standard became both US GAAP and IFRS on May 28th, 2014

    • US GAAP Topic 606 published as ASU 2014-9

    • IFRS 15

    • Text is identical; references to GAAP and to IAS are different; minor difference to ensure identity of meaning by reference to different glossaries; differences in transition and take up options

  • Implementation Timeline:

    • Effective date is set for first new fiscal after January 1, 2017

    • 2 Options on Retroactive Reporting

All

Companies

Live on New Rules + FRM1/12017

Start data capture for transitional reporting

1/1/2015

Standard Final

5/28

New Year

2016

OOW

2015

OOW

9/28

OOW

2016

25

2017

2014

2016

2015


Converged accounting standards applicability

Converged Accounting Standards Applicability

Concept Applies to All Companies, All Industries, All Countries

  • Industries

    • All, except Insurance and Lease vendors

  • GAAPs

    • Changes to both US GAAP and IFRS

  • Repeals (withdraws, cancels) the following US GAAP & IFRS statements

    • US GAAP (Codification): Topics 340-20, 360-20, 430, 605-15, -20, -25, -28, -30, -35, -50, 908-605, 910-605, 912-210, 912-235, 912-605, 915-605, 920-310, 920-605, 920-845, 922-430, 926-430, 926-605, 926-845, 928-430, 928-305, 932-605, 940-605, 942-605, 948-605, 952-340, 952-720, 954-340, 970-605, 976-605, 978-605 and 985-605

    • Amends many others.

    • IFRS: IAS 11 and 18


Converged accounting standards highlights

Converged Accounting Standards Highlights

“Performance Obligations” replace “Deferred Revenue”

  • All companies to identify Contracts – combinations of Customer Obligations that are related as a contract for accounting purposes. Example: Car + x years free service

  • Recognize Revenue on performance obligations you have satisfied – a “positive” definition, as opposed to “what you have billed, less carve-outs” or “lifted contingencies”

  • Recognize a monetary Customer Liability, “Performance Obligation”, (as opposed to deferring revenue) on performance obligations you have not satisfied but you do owe to customers

  • Recognize a Receivable only on your right to receive cash where the only condition is the passing of time (e.g. 30 days)

  • Recognize a Customer Asset, “Performance Asset”, on a conditional right to receive consideration for a satisfied obligation. A condition might be a requirement to complete satisfaction.

  • An open order is a Performance Obligation but not a Performance Obligation liability (3 conditions)

  • Value each obligation using “Observed Standalone” or “Estimated” Selling Prices apportioned to each element of the contract

  • No longer amortize a sales invoice to the P&L; instead, track (recognize and value, list and audit) performance obligations to customers – “obligations times SSP or ESP”, not “invoice minus released”


Revenue management cloud service

  • Converged Accounting Standards – Core Principle


The 5 steps and revenue management

The 5 Steps and Revenue Management

Revenue Recognition

  • Performance Obligation Liability

  • Revenue Valuation using SSP, ESP

  • From Performance Obligations to revenue on customer satisfaction

  • COGSs

  • GL Posting

Revenue Value

Obligations

Reporting

1

2

4

5

3

  • Calculate Transaction Price

  • Manage Revenue Pricing (SSP, ESP)

  • Tolerances

  • Identify Contracts with Customers from multiple sources

  • Identify obligations

  • Revenue compliance

  • Receivables and revenue reconciliation


Applying the 5 steps use case 1 a typical software solution provider

Applying the 5 Steps Use Case 1: A Typical Software Solution Provider

Performance Obligations

Revenue Values OSSP/ESP

Software License

Invoice

100

20

80

Software License

Support

Consulting

98

26

76

Customer Bill

Software License

Support

Consulting

100

20

80

200

200

Transaction Total

Support

Performance Satisfaction Forecast

200

Transaction Price

Period I

Period II

Period III

Consulting

Software License

Support

Consulting

98.00

8.66

16.00

0.00

8.67

20.00

0.00

8.67

40.00

122.66

28.67

48.67

Total


Revenue management cloud service

  • Applying the 5 Steps Data Capture and Bookkeeping for Use Case 1 (Software Solution Contract)

Recognize Revenue

Recognize CL

Recognize CA

Establish linked transaction price & constraint

ID distinct performance obligation from “order lines”

Apply relative observed SSP or ESP

Search through “order lines” from many sources & Link

E.G.

Oracle Confidential – Internal/Restricted/Highly Restricted


Applying the 5 steps use case 2 a specialty vehicle manufacturer

Applying the 5 Steps Use Case 2: A Specialty Vehicle Manufacturer

Performance Obligations

Revenue Values OSSP/ESP

Invoice

Product

0

5,000

1,000

300

250

Custom Rack & Bedliner

Truck

Trailer

5-yr Maintenance

10-yr Roadside

Etc…

4,000

2,000

280

270

PO 1000-10

PO 1000-20

Customer Bill

PO 1000-30

PO 1000-40

Truck

Custom Rack & Bedliner

Trailer

5-yr Maintenance

10-yr Roadside Assistance

10-yr Extended Warranty

Custom Trailer Doors

Custom Hatch

5,000

Free

1,000

300

250

235

400

180

Maintenance

7,365

7,365

Transaction Total

Performance Satisfaction Forecast

Transaction Price

7,365

Period I

Period II

Period III

PO 1000-10

PO 1000-20

PO 1000-30

PO 1000-40

Etc…

4,000

2,000

2.33

2.25

-

-

2.33

2.25

-

-

2.33

2.25

Custom Services

9,382.33

6.54

6.54

Total


Revenue management cloud service

  • Applying the 5 Steps Data Capture and Bookkeeping for Use Case 2 (Specialty Vehicle Contract)

Recognize Revenue

Recognize CL

Recognize CA

Establish linked transaction price & constraint

ID distinct performance obligation from “order lines”

Apply relative observed SSP or ESP

Search through “order lines” from many sources & Link

E.G.

Oracle Confidential – Internal/Restricted/Highly Restricted


Revenue management cloud service

  • New Standards and Revenue Management Current Release


Revenue management cloud service

  • New Standards and Revenue Management Upcoming Releases


Choice of transition methods credit kpmg

Choice of Transition Methods (Credit – KPMG)

Dual

reporting capability

Dual

reporting capability

Timeline is based on requirements applicable to a public entity with December 31 year end. Nonpublic entities

may defer application of standard for one year beyond public entity effective date.


Revenue management cloud service

Full Retrospective TransitionModel new rules in Revenue Management, compare and iterate as needed, and cutover in FY 2017

New Rules Apply

FY

2017

Old Rules & Restatement until last balance sheet before adoption (2017)

FY14, FY15, FY16,General

Ledger Content

EPM &

Original

Financial

Statements

EPM &

Restated

Financial

Statements

Existing RevenueRecognition

Deferred Revenue Performance Obligation

EPM &

Original

Financial

Statements

FY 17 General

Ledger

Content

Compare and contrast old and new, in a tool of your choice

Contracts

Invoices

Perf. Obligations

Revenue Pricing

Old Revenue

New Revenue

Other factors

Model

and

Iterate

Topic 606 / IFRS 15

Using Fusion Revenue

Management

Cutover


Agenda5

Agenda

  • Why Revenue Management?

  • Solution Footprint

  • Solution Deep Dive

  • Customer Traction

  • Converged Revenue Standards (IFRS 15/Topic 606)

  • Q&A


Revenue management cloud service

Questions?


Revenue management cloud service

Oracle Confidential – Internal/Restricted/Highly Restricted


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