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Confidential to aquarius consulting group www.aquariuscg.com Automating Revenue Deferrals and Revenue Recognition in Oracle Presentation for NorCal OAUG.

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Presentation on theme: "Confidential to aquarius consulting group www.aquariuscg.com Automating Revenue Deferrals and Revenue Recognition in Oracle Presentation for NorCal OAUG."— Presentation transcript:

1 Confidential to aquarius consulting group Automating Revenue Deferrals and Revenue Recognition in Oracle Presentation for NorCal OAUG Training Day Date: January 19th, 2009 Track: Financials Presented By: Mark Aubin | Associate Partner Ram Iyer | Senior aquarius consulting group llc.

2 Slide # Confidential to aquarius consulting group 2 agenda introduction revenue recognition | current practices managing revenue recognition and deferrals in oracle financials order to revenue accounting cycle | challenges the solution for Oracle case study SOP97-2 – residual method based revenue recognition on oracle Q & A

3 Slide # Confidential to aquarius consulting group 3 about us Founded in 2006 by experienced professional consulting executives and entrepreneurs Boutique consulting firm with a global client base Practice Areas: Billing and Revenue Recognition (BRM) Oracle Sales to Cash Consulting Solutions Program and Project Management Industry expertise: Hi-Tech Manufacturing | product & services Online Media and Publishing Interactive Entertainment Referencable industry leading global clients Primary Office: Silicon Valley Redwood Shores, CA

4 Slide # Confidential to aquarius consulting group 4 aquarius + revStream aquarius is a niche consulting firm specializing in billing and revenue management solutions; program management and post merger/acquisition integrations. aquarius brings extensive expertise in process design and implementation of sales to revenue solutions for online media and software/services industry. aquarius revStream solution is the only Oracle based solution to manage complex billing and revenue recognition business models. revStream is a comprehensive custom solution developed by aquarius to address the complex billing and revenue recognition requirements for Hi-Tech product/services; online media and entertainment software industry. It essentially a billing and revenue automation engine and workbench that bridges the gap that exists in todays major ERP systems

5 Confidential to aquarius consulting group revenue recognition current practices

6 Slide # Confidential to aquarius consulting group 6 fact Revenue recognition is the #1 reason for public high- tech companies to restate earnings – resulting in SEC investigation, drop in market value & plunging investor confidence – IDC, 2006

7 Slide # Confidential to aquarius consulting group 7 current practices | spreadsheets still rule! 92% of the public companies use spreadsheets for critical revenue recognition and reporting purposes – IDC 2006 Majority of ERP/financial IT infrastructure cannot automate all of your revenue recognition and reporting needs 57% of public companies finalize revenue numbers after month close vs 43% at close Revenue recognition restatements wipe out on average 10% of a companys market value according to a new study by Audit Analytics. The study measured market reaction from 50 days before until 50 days after the announcement Source: revenuerecognition.com and IDC

8 Slide # Confidential to aquarius consulting group 8 whats driving the need SOP97-2 or EITF00-21 or EITF08-01 (June 15, 2010) IFRS and/or US GAAP Reporting Cumbersome Data File Management (all Revenue Calculations and Deferrals on Excel, Access, or Data Warehouses) Internal Controls and Audit High Audit Costs Re-statements

9 Confidential to aquarius consulting group managing revenue recognition and deferrals in oracle financials Contract-to-Revenue Process: Key Challenges The solution for Oracle Case Study: SOP97-2 residual method revenue recognition

10 Slide # Confidential to aquarius consulting group 10 contract to revenue | challenges Opportunity to Quote Contra cts Order to Fulfill Bill to Collect Recogn ize Revenu e Financi al Reporti ng Account Mgmt, Sales & Contracts/PricingOperations, Delivery and Billing/Revenue Mgmt Period Close, Forecast and Financial Reporting 234 Financia l Close Complex and Evolving Revenue Accounting SOP 97-2 or EITF or ?? Complex Multi- element deals Bundled deals; tiered pricing, complex discounts Receivables = Revenue Billing not separate from revenue Manual = Excel Spreadsheets Offline data manipulation & reporting 1

11 Slide # Confidential to aquarius consulting group 11 revenue accounting process | multiple touch points Opportunity to Quote Contra cts Order to Fulfill Bill to Collect Recogn ize Revenu e Financi al Reporti ng Account Mgmt, Sales & Contracts/PricingOperations, Delivery and Billing/Revenue Mgmt Period Close, Forecast and Financial Reporting Financia l Close contract-to-revenue accounting cycle

12 Slide # Confidential to aquarius consulting group 12 critical revenue automation areas Independent billing and revenue scheduling and processing Apply different revenue treatments and carve-outs based on Fair Value/VSOE on elements within an order based on several different revenue recognition rules ex: residual method (SOP97-2) or revenue arrangements with multi-element deliverables (EITF00-21); contract accounting method (SOP81-1) recognition based on relative selling price method (EITF 08-01) Perform complete arrangement analysis in a multi-element deliverable Revenue scheduling based on business events (estimated and actual) and build revenue schedules to provide accurate and timely revenue forecasts. Match COGS and expense deferrals to revenue deferrals Configure complex revenue recognition and billing rules ex: define substantive rates and rule mapping for term or carve-outs Adjustments to original terms are frequent, requiring creating rebuilds and revenue trueup/catchups Create distributions and post approved transactions to GL.

13 Slide # Confidential to aquarius consulting group 13 revenue recognition for Oracle ERP In summary, our clients were seeking to automate revenue deferral and recognition with a solution that was scalable to growth, flexible for new business models and products, allowed compliance to evolving regulatory requirements, and delivered a low cost of ownership. Introducing revStream Revenue and Billing Manager. The ONLY revenue management solution for Oracle eBusiness Suite. Built entirely on the Oracle eBusiness Suite technology stack, its a sub- ledger module that fits within the Oracle eBusiness Suite portfolio.

14 Slide # Confidential to aquarius consulting group 14 major features and functionality Business Process Driven Arrangement Analysis and Revenue Recognition Automated identification of transactions for revenue deferral Complete arrangement analysis Automatic application of revenue treatment and amortization rules Automatic application of multi-element carveouts and reclasses Transaction approvals and revenue holds VSOE and Terms Maintenance Configurable Fair Value and VSOE matrices by multiple dimensions such as tier, customer type, service level, region, etc. Complies with SOP 97-2, EITF00-21, EITF 08-1, EITF 09-3 requirements. Supports reapplication of VSOE to historical transactions for restatements. Event based Revenue Recognition Automated acquisition and application of transaction events such as Execution, Shipment, Delivery, Installation, and Customer Acceptance Forecasting based on estimated events. Allows manual event adjustments with automatic reapplication of revenue treatments. Dynamic AutoAccounting Engine Org specific AutoAccounting to derive GL Code Combinations from numerous sources or defaults. Supports creating GL Distributions for US GAAP and IFRS reporting across multiple Sets of Books. It is a part of the eBusiness Suite; a new subledger. revStream components use standard Oracle eBusiness Suite architecture: Oracle Forms, PL/SQL, Concurrent Programs, Lookup Codes, Value Sets, etc. Uses Multi-Org structure and functionality. Uses common security components such as Responsibilities, Menus, Functions, Profile Options, and Request Groups. Full native integration to oracle modules – no interfaces

15 Slide # Confidential to aquarius consulting group 15 Billing Schedule 15 revStream | separates billing from revenue in Oracle ERP Opportunity to ContractOrder to Fulfill Create Opportunity Configure Price Quote Book Order Quote Approval 1 Invoice, Rev Rec. to GL GL Invoices (AR) Fulfillment Create installed base Customer & Deal Info Create Order Debit: Receivables Credit: Unearned Revenue Load Revenue Review & Approve Transfer to GL revStream: Revenue Manager Oracle Other Systems Other CRM revStream (aquarius solution) Debit: Unearned Revenue Credit: Revenue Load Invoices Review & Approve Transfer to AR revStream: Billing Manager b cd a Create /Accept Contract 5 GL

16 Confidential to aquarius consulting group Case Study: SOP97-2 residual method revenue recognition

17 Slide # Confidential to aquarius consulting group 17 primary contacts Mark Aubin Associate Partner Phone: | Fax: | Rajiv Chopra Managing Partner Phone: | Fax: |


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