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Bringing clarity to an IFRS world IFRS 15 – Revenue from contracts with customers
Please note – The audio for today’s presentation will be transmitted through your computer speakers October 21, 2015
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 2
Speakers
Moderator
Jon Kligman Partner, Assurance and Advisory
Presenters
Maryse Vendette Partner, Assurance and Advisory
Cindy Veinot Partner, Assurance and Advisory
Please submit questions and comments by sending an email to deloitteupdate@deloitte.ca
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 3
Agenda
1 Background
2 Recent developments
3 Proposed amendments
4 Implementation considerations
5 Resources
6 Questions and answers
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 4
Important caveats
• This webcast does not provide official Deloitte interpretive accounting guidance.
• Check with your advisor before taking any action.
Please submit questions and comments by sending an email to deloitteupdate@deloitte.ca
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 5
Background Scope
What is In? What is Out? • Applies to contracts with customers • Assess contracts with collaborators or
partners • Transfer or sale of non-financial assets • Incremental costs of obtaining and costs
incurred to fulfil a contract
• Lease contracts • Insurance contracts • Financial instruments and other contractual
rights or obligations within the scope of other Standards
• Non-monetary exchanges between entities in the same line of business to facilitate sales to customers or potential customers
Certain transactions may fall partially within the scope of IFRS 15 and partially within the scope of other standards
Background (cont’d)
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 6
Effective date and transition options
• Effective date NEW− Annual reporting periods beginning on or after January 1, 2018, including
interim reporting periods therein (FY 2018)
− Early application is permitted under IFRS and U.S. GAAP
• Transition options
1) Retrospective Approach
− Practical expedients available
2) Modified Retrospective Approach
Background (cont’d)
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 7
The revenue model
Core principle: Recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled in exchange for those goods or services
Recognition Para. 9–21
Recognition Para. 22–30
Measurement Para. 46–72
Measurement Para. 73–90
Recognition Para. 31–45
Identify the contract with a
customer (Step 1)
Identify the performance obligations in the contract
(Step 2)
Determine the transaction
price (Step 3)
Allocate the transaction
price to performance obligations
(Step 4)
Recognize revenue when
(or as) the entity satisfies a
performance obligation
(Step 5)
This revenue recognition model is based on a control approach which differs from the risks and rewards approach applied under existing IFRS.
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 8
Recent developments
• Joint Transition Resource Group for Revenue Recognition (TRG)
− Subsequent to release of the Standard, the IASB and the FASB implemented the TRG
− TRG solicits, analyzes and discusses stakeholder issues arising from implementation and will inform the IASB and the FASB of issues that may warrant further attention on the part of the Boards
− Composed of financial statement prepares, auditors and users that have significant knowledge and experience related to revenue recognition
− As at July 2015, 75 issues submitted (43 papers discussed)
− 36 issues with no further action at this time
− 15 issues submitted to Boards for further deliberations
− 8 issues are pending potential future discussions
− 3 issues may result in technical correction or minor improvement at a later date
− 13 issues pending minutes of July TRG meeting
− Next meeting scheduled for November 9, 2015
Recent developments (cont’d)
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 9
Timeline
May 2014
July 2014–January 2015
February–March 2015
July 22, 2015
TRG
StandardIssued
FASB deferral approved
IFRS exposure draft issued• Identifying performance obligations• Licences and royalties• Principal vs agent• Practical expedients – Contract
modifications and completed contractsComment period ends: October 28, 2015
IFRS deferral approved
TRG
TRG
TRG
TRG
FASB/IASB
FASB/IASBFASB proposed ASU issued• Gross vs. netComment period ended: October 15, 2015
July 13, 2015
May 2015
June 2015
FASB/IASB
August 12, 2015
July 29, 2015
FASB proposed ASU issued• Identifying
performance obligations• Licenses and royaltiesComment period ended: June 30, 2015
July 30, 2015
FASB
August 31, 2015
FASB
October 5, 2015
FASB proposed ASU issued• Narrow-Scope
Improvements• Practical ExpedientsComment period ends: November 16, 2015
September 30, 2015
FASB
September 22, 2015
IASB
Recent developments (cont’d)
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 10
Board discussions
Issue IFRS Proposed amendment*
FASB Proposed amendments*
Identifying performance obligations (i.e., identifying promised goods or services)
No amendment May 2015
Immaterial promised goods or services No amendment May 2015 Shipping and handling activities No amendment May 2015 Identifying when promises represent performance obligations July 2015 May 2015 Determining the nature of an entity’s promise in granting a licence July 2015 May 2015 Sales-based and usage-based royalties exception July 2015 May 2015 Principal vs agent [Gross vs. Net] July 2015 August 2015 Practical expedients – Contract modifications and completed contracts
July 2015 September 2015
Sales tax presentation – Gross versus net No amendment September 2015 Non-cash consideration No amendment September 2015 Collectability No amendment September 2015
*Note: Although some amendments cover the same topics, the amendments proposed by the Boards differ in some respects.
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 11
Proposed amendments Identifying performance obligations
Issue IASB Decision FASB Decision Determining whether promised goods and services are distinct in the context of the contract
No amendments to the guidance were proposed; however, additional illustrative examples will be included
The following decisions were made: • Define the term
“separately identifiable” • Reframe the separation criteria to
focus on a bundle of goods or services, and
• Add illustrative examples Shipping and handling services as a promised service or activity to fulfill other promises
No updates were proposed Clarified that shipping and handling that occurs before control transfers to the customer are fulfillment activities and allows entities to elect as a practical expedient to treat shipping and handling as fulfillment activities if they occur after control transfers
Identifying immaterial promised goods or services
No updates were proposed. Entities are not required to identify promised goods or services that are immaterial in the context of the contract
Refer to the FASB’s Proposed ASU issued on May 12, 2015 and the IASB’s Exposure Draft issued on July 30, 2015 for further information.
Step 5Step 4Step 3Step 2Step 1
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 12
Identifying performance obligations Example – Goods and services [FASB ASU 606, Ex. 11D] • Company ABC enters into a contract with a customer to provide equipment as well as
installation services.
• The equipment is functional without customization or modification.
• Installation can be performed by other service providers.
• The contract requires that Company ABC is used for installation.
Identify the performance obligation(s).
Identifying performance obligations (cont’d)
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 13
Example – Goods and services
• Evaluate the relationship between the goods and services in fulfilling the contract (level of integration, interrelation and interdependence)
Functional Goods and services are by their nature dependent upon the other to function
Transformative Goods and services are transformed into a promise that is greater than the sum of the underlying items
• The customer can benefit from:
− The equipment (on its own through use or resale), and
− The installation services (in conjunction with the equipment)
• The equipment is not modified or customized by:
− Installation, OR
− Contractual requirement to use Company ABC’s installation services
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 14
Identifying performance obligations (cont’d)Example – Shipping and handling services
• Entity A enters into a contract with Customer B for goods that are shipped on a Cost, Insurance and Freight (CIF) basis.
• Terms are such that title passes once the goods cross to the ship’s rail at which time Customer B is obliged also to pay for the goods.
• Entity A is responsible for freight as a principal.
Identify the performance obligation(s).
1. Sale of goods 2. Freight services
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 15
Identifying performance obligations (cont’d)
U.S. GAAP: Accounting Policy
Timing of shipping and handling services
When do shipping and handling activities occur?
BEFORE transfer of control
AFTER transfer of control
Fulfilment activity Separate performance obligation Fulfilment activity
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 16
Proposed amendments Licences of intellectual property
Issue IASB Decision FASB Decision Determining the nature of an entity’s promise in granting licence - right to access over time or right to use at a point in time
An entity should focus on whether an entity’s activities significantly affect the IP to determine the nature of a licence
Requires an entity to characterize the nature of a licence as either functional or symbolic. This determination is based on whether the underlying IP has significant standalone functionality
When to recognize revenue for sales-based and usage-based royalties
The following decisions were made: • An entity should not split a royalty when determining whether to
apply the constraint exception, and • An entity should apply the royalty constraint exception if the
licence is the predominant feature to which the royalty relates
Refer to the FASB’s Proposed ASU issued on May 12, 2015 and the IASB’s Exposure Draft issued on July 30, 2015 for further information.
Step 1 Step 2 Step 3 Step 4 Step 5
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 17
Licences of intellectual property Example – Sales-based royalties [IFRS 15,Ex. 60]
• An entity, a movie distribution company, enters into a contract to licence Movie XYZ to a customer, an operator of cinemas, for six weeks.
• The total consideration the entity will receive is a portion of the operator’s ticket sales for Movie XYZ.
• In addition, the entity has agreed to:
a) Provide memorabilia for display at the customer’s cinemas prior to the six week screening period, and
b) Sponsor radio advertisements for Movie XYZ on local radio stations throughout the six week screening period.
Does the royalty constraint apply? How is revenue recognized?
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 18
Licences of intellectual property (cont’d)Example – Sales-based royalties
• Yes, the sales-based royalty constraint applies since the licence to show Movie XYZ is the predominant item or performance obligation.
• Revenue is recognized only when (or as) the later of the following events occurs:
a) The subsequent sale or usage occurs [as tickets sold and movie shown], and
b) The performance obligation to which some or all of the sales-based or usage-based royalty has been allocated has been satisfied (or partially satisfied).
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 19
Licences of intellectual property (cont’d)Example – Right to use vs. right to access [IFRS 15,Ex. 58] • A creator of comic strips licences the use of the images and names of its comic strip characters for
a four-year term.
• There are main characters in the comic strips, whose images evolve over time and new characters are periodically introduced.
• The customer can use the entity’s characters in various ways but the contract requires the customer to use the latest images of the characters.
• In exchange for granting the licence, the creator receives a fixed payment of $1 million in each year of the four-year term.
What is the nature of the licence?
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 20
Example – Right to use vs. right to accessLicences of intellectual property (cont’d)
What is the nature of the entity’s promise in granting the licence?
Right to access IP throughout the
licence term
Right to use IP as it exists when
licence granted
Recognize over time
Recognize at a point in time
• The creator’s activities [evolving images] changes the form of the intellectual property to which the customer has rights.
• The rights granted by the licence directly expose the customer to any positive or negative effects of subsequent activities [contract requires the customer to use the latest characters].
• Even though the customer may benefit from those activities through the rights granted by the licence, they do not transfer a good or service to the customer as those activities occur.
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 21
Proposed amendments Non-cash consideration and sales tax presentation
Issue IASB decision FASB decision Determining the measurement date for non-cash consideration and application of the variable consideration constraint
No updates were proposed Standard clarifies that: • An entity should measure at fair
value non-cash consideration at contract inception, and
• The constraint should only apply to variability resulting from reasons other than the form of consideration
Simplifying the application of sales tax presentation
No updates were proposed. Permits entities, as an accounting policy election, to exclude amounts collected from customers for all sales taxes from the transaction price
Refer to the FASB’s Proposed ASU issued on September 30, 2015. No updates are currently being proposed by the IASB for these topics, however stakeholder input on the Clarifications to IFRS 15 ED may eventually influence the future agenda.
Step 1 Step 2 Step 3 Step 4 Step 5
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 22
Non-cash consideration Example [FASB ASU 606, Ex. 31]
• An entity enters into a contract with a customer to provide a weekly service for one year.
• The contract is signed on January 1, and work begins immediately.
• In exchange for the service, the customer promises 100 shares of its common stock per week of service (5,200 shares total).
• The contract requires that the shares are paid upon the successful completion of each week of service.
How should the non-cash consideration be measured?
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 23
ExampleNon-cash consideration (cont’d)
IFRS
• Measure consideration by reference to the FV of 100 shares received upon completion of each weekly service.
U.S. GAAP
• Measure consideration as at the contract inception date.
Revenue recognized =100 shares * week 1 market price
Revenue recognized =100 shares * week 2 market price
Revenue recognized =100 shares * week 3 market price
Revenue recognized = 5200 shares * market price
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 24
Proposed amendments Collectability
Issue IASB decision FASB decision Clarification of the collectability criterion and accounting for contracts that fail the collectability criteria.
No updates were proposed. Standard clarifies that: • Collectability would be assessed on
the basis of the amount to which the entity will be entitled, and
• A contract is terminated if the entity has the ability to stop transferring goods or services to the customer.
• Revenue is recognized when the entity has transferred control of the goods or services, the entity has stopped transferring additional goods or services and has no obligation to transfer additional goods or services, and the consideration received from the customer is nonrefundable.
Refer to the FASB’s Proposed ASU issued on September 30, 2015. No updates are currently being proposed by the IASB for these topics, however stakeholder input on the Clarifications to IFRS 15 ED may eventually influence the future agenda.
Step 1 Step 3Step 2 Step 4 Step 5
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 25
Collectability Example [FASB Memo March 12, 2015]
• An entity enters into a contract with a customer for the supply of a good [modem] and the provision of a subsequent service [internet] for 3 years. The contract price is $460, payable as follows:
− $100 at contract inception when the modem is transferred to the customer
− $10 payable at the end of each month for the next 3 years as the service is provided
− In the first month of the second year, the customer stops paying consideration when it is due.
How should revenue be recognized? What if the entity stops providing the service to the customer?
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 26
Proposed amendments Principal versus agent considerations
Issue IASB Decision FASB Decision Principal agent considerations Standard clarifies that:
• An entity should assess whether it obtains control of the distinct good or service before it is transferred to the customer to determine whether it is acting as a principal or agent
• The indicators in the standard are intended to assist an entity with determining whether it obtains control of a good or service, and are not intended to override the control principle, and
• Clarified that each indicator can have more or less significance than others
• In a contract with multiple goods or services, an entity could be a principal for some and an agent for others
Refer to the FASB’s Proposed ASU issued on August 31, 2015 and the IASB’s Exposure Draft issued on July 30, 2015 for further information.
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 27
Principal versus agent considerations Example [IFRS 15,Ex. 46A]
• An entity enters into a contract with a customer to provide office maintenance services.
− The customer is invoiced a fixed price on a monthly basis with 10-day payment terms.
• The entity then engages a third-party service provider to provide the office maintenance services.
− Payment terms are aligned with the customer’s terms, however, the entity must pay regardless.
Is the entity a principal or agent?
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 28
ExamplePrincipal versus agent considerations (cont’d)
• Assess when control is obtained:
− The entity is able to direct the third-party service provider to provide specified services on its behalf
− Thus obtains control of the services before they are provided to the customer
• Consider additional indicators/criteria, if necessary:
− The entity:
− Responsible for the acceptability of the services
− Has discretion in setting the price for the services to the customer
− Has credit risk for the amount receivable from the customer
− Does not have inventory is risk
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 29
Proposed amendments Practical expedients upon transition
• With respect to contract modifications occurring before adoption of the standard, an entity is permitted to use hindsight as of the contract modification adjustment date (“CMAD”) and perform a single analysis to determine the transaction price and allocate the transaction price to performance obligations
Topic IASB Decision FASB Decision Practical expedient upon transition to address contract modifications
The CMAD is defined as the beginning of the earliest period presented under both transition methods
The CMAD is defined as the beginning of the earliest year presented upon initial adoption of the standard under the full retrospective approach and the beginning of the current period under the modified approach
Refer to the FASB’s Proposed ASU issued on September 30, 2015 and the IASB’s Exposure Draft issued on July 30, 2015 for further information.
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 30
Contract begins in 2014, ends in 2020
Practical expedients upon transition Contract modifications
Full retrospective approach Modified retrospective approach
Do NOT separately evaluate the effect of each contract modification prior to January 1, 2017
Do NOT separately evaluate the effect of each contract modification prior to January 1, 2017
2014 2015 2016 2017 2018 2019 2020Date of initial application
Modification #1
Modification #2
Refer to the FASB’s Proposed ASU issued on September 30, 2015 and the IASB’s Exposure Draft issued on July 30, 2015 for further information.
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 31
Proposed amendments Practical expedients upon transition
Topic IASB Decision FASB Decision Practical expedients upon transition to address completed contracts.
With respect to completed contracts, entities are also permitted to exclude the evaluation of any contract completed at the beginning of the earliest period presented when applying the full retrospective transition approach.
Standard clarifies: • The definition of a ‘completed
contract’ • That entities are permitted
apply modified retrospective transition approach either to all contracts or only to contracts not completed as at date of initial application.
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 32
Practical expedients upon transition Completed contracts – Definition
IFRS 15 FASB’s Proposed ASU A completed contract is a contract for which the entity has transferred all of the goods or services identified in accordance with IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations.
A completed contract is a contract for which all (or substantially all) of the revenue was recognized in accordance with revenue guidance that is in effect before the date of initial application.
• Example – A licence with future royalty stream. The entity has delivered the licence. Revenue is being recognized as the royalties are reported.
IFRS: Contract is completed – Licence has been delivered
U.S. GAAP: Contract is not complete
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 33
Transition method considerations
Full retrospective method Modified retrospective method • Advantages
- All contracts are restated leading to a more fulsome depiction of financial performance, greater comparability and consistency.
- Better trend information for stakeholders, facilitating more meaningful conclusions.
• Disadvantages- A larger population of contracts to be
obtained, analyzed and assessed.- Potential issue with obtaining historical
information supporting analysis and disclosures, increasing reliance on legacy systems and other departments
• Advantages- Smaller population of contracts and no
disclosures for comparative periods, reducing the volume of information required for transition.
• Disadvantages- Presentation may be ‘fragmented
providing limited comparability among periods and reducing trend information
- Although restatement of comparative period is not required, additional disclosures are still required.
- In year of transition, entities will need to retain two sets of records, and potentially require two sets of systems, controls, processes, etc., to have parallel accounting
34© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers
Implementing IFRS 15
Accounting Changes – Timing, Presentation and Disclosure Processes
and Controls
Information Technology
TaxPeople
Stakeholders
35© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers
Processes and controls considerations
Examples of implications
1 Combining contracts; Modifying contracts
2 Material rights
3 Tracking information for disclosure
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 36
Process and control considerations Contract combinations, contract modifications
Operational change/challenge Process and control considerations • Contracts negotiated with the same
counterparty (related entity) and meeting certain criteria need to be combined and evaluated as one contract
• Identification of contracts to be considered for combination – Time-line
– Criteria for combination • Modifications to contracts are accounted for
prospectively (separately or combined with outstanding obligations) or retrospectively
• Types of modifications permitted • Identifying and tracking modifications
• Analyzing modifications
Process and control considerations (cont’d)
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 37
Material rights
Operational change/challenge Process and control considerations • Material rights – May include:
– Loyalty programs
– Option to purchase goods or services
– Option to extend contract at a lower price – Non-refundable upfront fees
• Valuation of material right
• Accounting for material right
• Process to identify material rights – Flagging free/discounted goods or services
• Valuation process – Estimating the percentage of options that will be exercised
• Tracking exercise or expiration of option
Process and control considerations (cont’d)
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 38
Disclosures
Operational change/challenge Process and control considerations • Significant additional quantitative data
to disclose – Disaggregation of revenue
– Transaction price allocated to remaining performance obligations
– Revenue recognized that was included in contract liability
– Closing balance of costs to obtain or fulfill a contract by category
– Amortization of contract assets
• Processes for aggregating data • Contract database
• Reconciliation processes
• Linking amortization of contract assets to transfer or goods/services under contracts
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 39
Information Technology considerations Technology solutions to address changes related to the new standard
ERP Vendor Solutions (e.g., Oracle, SAP)
Specialty Solution/ Business Rules Engine Custom
• ERP vendors are well positioned to support solutions based on their deep expertise in financial processing and reporting
• Oracle – Advocates the Sub-Ledger Accounting (SLA) and Financial Accounting Hub (FAH) modules to address the business rules need within the Standard
• SAP – Leverages RM-CA to support revenue sub-ledger accounting and business rules
• NetSuite – Encourages their cloud-based ERP solution with integrated revenue management module
• Various accounting specific business rules and revenue management solutions have started to work on re-designing their solution to be compliant with the standard and work in conjunction with existing ERP implementations.
• Vendors include: Leeyo (RevPro), RevStream (RevStream), Microgen (Aptitude), Softtrax (Softtrax Revenue Manager)
• Existing data warehouse to support customized solution
• Possibilities might exists to address specific parts of an end-to-end solution with a custom built system (e.g., contract data storage)
• Typically longer life cycle and higher cost of ownership
Information technology considerations (cont’d)
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 40
Areas to explore in considering solutions for your specific requirements Areas to explore in considering solutions for your specific requirements
Incremental data/system requirements
What data or system changes will be critical to new accounting complexities?
Industry alignment Does the solution cater to or specialize in the client’s industry?
Automation opportunity Can the current process be readily scaled or automated to reduce overall process risk?
Integration of products What other systems will need to integrate with the solution? (e.g., CRM, CMS, Sales, Billing, ERP)
Hosting model Are you best served by a web-based (cloud) solution or one that is hosted on-site?
Information technology considerations (cont’d)
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 41
Needs and capabilities
Leverage learnings from others Accelerator tools External expertise
• Across multiple phases of the lifecycle – Impact assessments, scenario and business requirements development, IT solution design and program management support
• Deep experience within industries – Business-to-Consumer and Business-to-Business B2B”, Hosted Managed Services (“HMS”)
• Accounting positions • Issues/gaps template • Use case scenario inventory • Detailed calculation templates for
all scenarios • Solution architecture diagrams • Data dictionary • Pre-populated Business
Requirements Documents (“BRDs”)
• Across various industries within Europe and the Americas, with a heavy focus on technology, media, and telecommunications
• Cross-functional teams to provide a breadth of services – Technical accounting, IT consulting and tax
• Learnings from roundtables with technology, media and telecommunications industry representatives
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 42
Implementation considerations Near-term actions and important decisions
Near-term actions Important decisions • Scope the impact of the standard – what
revenue streams are in scope • Develop a short-term plan to assess the key
impacts and prepare an implementation plan by: – Reviewing sample of contracts – Analyzing effect of the changes on
financial statements – Identifying disclosures requiring new data
elements to be collected • Estimate the level of effort required to
implement the standard
• Accounting policy choices and significant judgments – Transition method
• Contract vs. portfolio approach • Systems approach
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 43
Resources
Deloitte resources
• IASPlus
− IFRS in Focus
− Accounting Roundup
− Heads Up
• Center for Corporate Governance
• The new revenue recognition standard webcast - June 26, 2014
Other resources
• IASB website
• TRG meetings and summaries
• AICPA task forces
• CPA Canada Reporting Alert: IFRS 15 Revenue from Contracts with Customers
© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers 44
Resources (cont’d)Contacts
Toronto
Sean Morrison Partner 416-601-6296 seamorrison@deloitte.ca
Cindy Veinot Partner 416-643-8752 cveinot@deloitte.ca
Mark Wayland Partner 416-601-6074 mawayland@deloitte.ca
Calgary/Edmonton/Winnipeg
Steve Aubin Partner 403-503-1328 saubin@deloitte.ca
Montreal
Nick Capanna Partner 514-393-5137 ncapanna@deloitte.ca
Vancouver
Joe Read Senior Manager 604-640-4930 josread@deloitte.ca
National
Maryse Vendette Partner 514-393-5163 mvendette@deloitte.ca
45© Deloitte LLP and affiliated entities. | Bringing clarity to an IFRS world – IFRS 15 – Revenue from contracts with customers
Questions and answers
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