tech mahindra ifrs 15 introduction & offering · pdf filemodules of core hr , sshr , otl...

1Copyright © 2015 Tech Mahindra. All rights reserved.

IFRS – 15 Introduction & Offering

Tech Mahindra


Content

• IFRS15 understanding

• Revenue Recognition process

• A Contract Scenario Modelled

• IFRS Summary Architecture

• Product / Aptitude Partnership

• Offerings

• Our IFRS Project and experience

• Opportunities in hand/expected

• Delivery Approach


When to recognize revenue?

• Under new IFRS 15, the transaction price must be allocated to the

individual performance obligations in the contract and recognized when these

obligations are delivered or fulfilled

IFRS15 understanding

• IFRS-15 is issued by the International Accounting Standards

Board and will supersede all revenue recognition standards in

previous IFRS and US GAAP


What Impact for Telco?

• Significant impact on Telco’s given large number of handset/service plan

options they offer, the frequency with which customers modify their plans and

the volume of contracts

Expl : if the operator gives a handset for free with the prepayment plan, then

the revenue from handset is 0.

Revenue recognition does not correspond with monthly billing to

customers, as there will be some deferral accounts involved.

Most impacted industries are telecom, software development, real

estate and other industries with long-term contracts with bundled

contracts of “product + service”



•Contract modifications:

what happens when customers modify their contracts with operators, for example

– change the amount of prepaid minutes or add new services?

•Time value of money and discounting:

IFRS 15 strictly defines the “financing component” and requires accounting for

such a component separately from revenue.

•Costs related to obtaining a customer:

However, IFRS 15 requires capitalizing them and recognizing them in profit or

loss in line with revenue recognition. How are telecom operators going to do

that? What will be the pattern of expensing these costs in P/L?


Significant impact on Telco’s


Significant impact on Telco’s

• large number of handset/service plan options they offer, the frequency with

which customers modify their plans and the volume of contracts

• Telco’s need to report in IFRS-15 complaint format from Jan 2018 and

therefore they need to prepare now

• The Customer target audience for IFRS-15 compliance discussions will

be Finance IT, Finance Directors and CFO’s



Revenue Recognition process in IFRS 15

5 Step Model of Revenue Recognition in IFRS 15

The requirements of IFRS 15 apply to each contract thathas been agreed upon with a customer and meets specified criteria.

Goods and service to be separately identifiable from other promises in the contract.

The transaction price can be a fixed amount or a variable consideration i.e. estimation of consideration.

On the basis of therelative stand-alone selling prices of each distinct good or servicepromised in the contract.

Revenue recognition based on performance obligation of transfer of promised good orservices to the customer.


Contract Type:

Subsidised Handset,

Mobile Service; Initiation

Fees, plus associated on-

going deliverables and

charges

Product Component

Performance Obligation Component

Activation Fee:

Initiation £13

Regulatory Fee:

Government

Regulatory

Recovery Fee

(GRRF) £3

Equipment:

Handset:

Apple iPhone 5s

- Silver- 64 GB

Mobile Service:

24 month

contract £70 per

month

Regulatory Fee:

Emergency

Service £1.50

A Contract Scenario Modelled

IMMEDIATE

DISTINCT

OBLIGATION

IMMEDIATE

NON-

DISTINCT

OBLIGATION

ONGOING

DISTINCT

OBLIGATION

ONGOING

NON-

DISTINCT

OBLIGATIONS

Business Event:

Contract Signed for

Bundle, Tariff, Product, Plan etc.


Business Event

A new customer goes into a shop and signs a contract as follows

A Contract Scenario Modelled

Lifecycle Contract Summary

Inception (at the start)

24 month term at £70 per month, (sold separately at 10% less)

A subsidised handset for £150 (sold separately at £700)

A one off activation fee of £13

A government regulatory recovery fee of £3 per month

Emergency services fee of £1.50 per month

A commission of £20 was paid to the sales person at inception

After 6 months(modification)

Customer adds an enhanced voice mail service £20 per month

After 13 months(termination)

The customer early terminates the contract


Middleware

Data Warehouse

Billing

Consolidation,

Mapping &

Summarisation

Automatic &

Manual

Processes

Billing Data

Accounts Receivable

Collections Financial Data

Costs

Contract Data

IFRS Summary Architecture

Data Preparation

Out-bound

TechM

L

T

E

Journal

Summary

Reporting

extracts to DW

TechM + Recognition Engine

ARRE Processes

Allocation

Calculatio

ns

S & T

V

E

Data

Error

IN

Fixed

OUT

Data

Storage

Rules

Finance

Events

Accountin

g Events

Input

API

Contr

act

Hopp

erContr

act

Produ

ct Part

Hopp

erProfile

Maps

Produ

cts

Produ

ct

Prices

Produ

ct

Bundl

es

Output

API

Reporting

Data

Data Preparation inbound Layer

TechM

Client

Finance

Environment

General

Ledger

Management

Reporting

Operational

Reporting and

Analytics

Client

Source

Systems

Billing

POS

CRM

Inventory

Costs

Data

Warehouse

Other

Business As Usual Current General Ledger Interfaces

STEP 1

Identify the Contracts with

Customers

STEP 2

Identify the Separate

Performance Obligations

STEP 3

Determine the

Transaction

Price

STEP 4

Allocate the Transaction Price to

the Performance Obligations

STEP 5

Recognise the allocated revenue when the performance

obligation is satisfied

Deployment as a Delta Adjustment Engine for faster

compliance with minimal interruption to Business As Usual


Typical Architecture for IFRS 15 Compliance – Tech M Offerings

Offering 4

– BI

Offering 2 – Product

Evaluation &

Implementation

Offering 3 –

Data

Preparation

Offering 1 – Consulting overall

Solution


IFRS Adoption Journey

• Business Consulting by Accounting and Auditing Experts

Step-1

• IT Consulting, Implementation Upgrade, Migration and Support

Step-2 • Domain Consulting

• Change Management

• Corporate Communication Management

Step-3

Partners

(Big 4) TechM

TechM EBS-

Oracle/ Microgen


Offerings – 1. Consulting on Path to IFRS-15 compliance

This is discovery phase activity which will be take around 2-3 weeks to complete.

• Study of ‘as-is’ landscape

• Options on path to IFRS compliance from ‘as-is’ state

• Overall solution architecture for IFRS-15 compliance

• Project Plan to IFRS – 15 compliance


Offerings – 2. Product Evaluation & Implementation for IFRS-15

There are multiple products available in market like, Aptitude, Legerity, Sopra Steria, Oracle, SAP. We

have a proven methodology to evaluate a product for relevance to specific client context based on

following criteria:

• TCO

• Product track record

• Technology Platform wrt Clients existing IT estate

• Cloud vs On Prim

• Organize Product Demos & Proof of concept

• Adherence to schedule

• Flexibility


IFRS Engine Competitor overview


Offerings- 3. Data Preparation for IFRS offerings

• Platform to receive data for IFRS Engine from multiple sources like Billing,

contract, customer, Commission & Product applications/systems

• Transform data based on business rules in the format required by IFRS

engine (example – aptitude)


TechM IFRS Capability & Experience Highlights

BMI Bank: Implementation of

Oracle e-Business Suite

R12.1.3 for Oracle Financial

and Financial Reporting in line

with IFRS Standards

CISCO : Currently Implementing

IFRS 15 Revenue

Salam International:

Implementation of R12 which

includes Financial modules of GL

, AP , AR , FA and CM and HRMS

modules of Core HR , SSHR , OTL

and Payroll

TDIC: Implementation of Oracle

Financial with IFRS Reporting

Compliance

JDSU: Globally Rolled out Oracle

and roll off all legacy / bolt-on

applications - Rollout of Oracle

to 21 countries at LATAM, EMEA

and APAC

Emirates Bank Group:

Implementation of Rel. 12 of

Oracle Applications: GL, FCH,

FSAH, AP, AR, FA, Property

Manager,

KPN: Currently Implementing

IFRS 15 Revenue

Dubai Holding: Implementation

of Oracle e-Business Suite

R12.1.3 for Oracle Financial with

IFRS Reporting Compliance

Petroplus: Secondary books with

local currency to meet local GAAP

requirements, USD as the single

functional currency within the group

as per IFRS requirements

PT Bhadak : Implementation of

Oracle E-Business Suite R12

including the Financial

(AP,AR,CM,FA,GL),

I Copyright © 2016 Tech Mahindra. All rights reserved.23

Case Studies - KPN

Our IFRS Experience

CUSTOMER OVERVIEW: Largest Telecom Operator in Netherlands

Business scenario

Change of Company’s

accounting policy for revenue

recognition from IAS-18 to

IFRS-15

Changing to dual reporting

(IAS18 & IFRS15) for 2017

Changing to IFRS15 from 2018

Our solution

• Implement Revenue Recognition

Engine. TechM advisor for

vendor selection process as MSP

• TechM configuring secondary

ledger and secondary FAH for

dual reporting capability in 2017

• TechM to change primary ledger

and primary FAH to move to

IFRS15

• Interfaces between Revenue

Recognition Engine and other

systems such as Billing, ERP,

data warehousing etc.

Value delivered

• Change revenue

recognition policy of

company from IAS-18 to

IFRS-15

• Solution Advisor from

technology perspective

to adhere to Enterprise

Architecture

• Multidimensional

reporting based on

IFRS15 requirements for

financial statement and

disclosures.


Case Studies – BMI Bank

Our IFRS Experience

CUSTOMER OVERVIEW: A Premier Bank in Middle East

Business scenario

Migration from US GAAP to

IFRS needed

Revamp of Disintegrated and

old Systems

Reduction in cycle-time for

business responses

Services on demand to the

customer

Need for robust back

applications

Intelligent Reporting system

Singular Document

Management system

Enterprise

Our solution

• Implementation of secondary ledger

and FAH for IFRS Compliance

• Internet portal implementation using

Oracle web-center resulting in award

prestigious e-Content Award

• Organization wide ECM (Enterprise

Content Management System)

implementation.

• Hyperion Consolidation System

implementation for integrated

reporting and planning/budgeting

• Oracle Ebiz System for Finance, HRMS

and SCM modules implementation &

Siebel CRM implementation

• T24 core banking application

implementation & Integration services

using SOA

• Single Sign On implementation

• Infrastructure management services

(IMS)

• EPM implementation

Value delivered

• Financial Reporting in line with

IFRS Standards

• Solution designed for growth

and helps in business growth

• Multi-dimensional view of

strategic goal achievement

• Best in breed tools used to meet

specific requirements

• Comprehensive Document

Management System

• Identity management for single

and comprehensive

authentication


Case Studies – Petroplus

Our IFRS Experience

CUSTOMER OVERVIEW: A refiner and wholesaler of petroleum products in Europe

Business scenario

GL accounting for each company

for all transactions prospectively in

USD in compliance with IFRS..

Each company accounting for all

transactions on a notional or

restatement basis in their

domestic currencies such that

o It is able to comply with

local GAAP reporting

requirements

o It is capable of generating

the required information in

the required format to

comply with various

submissions to local

authorities

All companies managing their

GL’s using Oracle Financials

Our solution

• Implementation of Oracle GL with

Primary and secondary Ledgers to map

requirements as per IFRS and Local

GAAP respectively

• Restatement of financial statements in

USD as per IFRS Standards and

calculation of foreign exchange

gain/loss

• Program Management (includes setting

up of a dedicated Project Management

Office)

• Change Management

• Technical architecture for hosting of

single global instance

Value delivered

• Consolidated GL Set of Books for

all businesses

• Consolidated IT Application

within the group

• Common Group Chart of

accounts

• Operate in single currency

worldwide

• Secondary books with local

currency to meet local GAAP

requirements

• USD as the single functional

currency within the group as per

IFRS requirements

comprehensive authentication


IFRS : Opportunities in hand/expected

VIVA Kuwait

Proposal Submitted as SI Partner for integration,

Defense going on; Aptitude should be IFRS engine

Etisalat UAE

Yahsat UAE

Ooredoo Oman

VIVA Bahrain

Telecom South Africa

KPN Neatherland


Business Consulting by

Accounting and Auditing

Inbound Data Preparation and

Integration

IFRS Engine Implementation

and Configuration

Outbound Data Integration to

ERP and BI

BI Reporting for Reconciliation and Reporting

TechM

Tech M – IFRS

Engine (Oracle/

Microgen)

TechM

TechM

Consulting

Companies with

auditing experts

IFRS Implementation Journey


Delivery Approach

Building Reusable ETL components for inbound and outbound Integration Building ETL Reusable component for Inbound and Outbound integration based

on IFRS engine which help reducing time and cost of implementation

Building Standard Test Scenario for Requirement and Testing Needs to consolidate standard Test Scenario which will be considered while

configuring product and Testing. This considered to be most time consuming and

risky part for onetime implementation.

Building Reusable Templates for Reconciliation Reconciliation reports will be one of requirement which can be standardized

Building Template for Standard BI Reports for Revenue Recognition Building Standard Reports template to expedite process of building Reports

Achieving excellence through reusable components


Implementation Readiness

Building up Core IFRS Team Core IFRS team will comprises of Functional consultant, Technical Architect,

Technical lead who would be trained through Product vendor

Core IFRS team will be part of engine implementation and Testing across projects

Necessary training will be departed through them to customer and internal team

Core IFRS team will also help in building support team and plan for IFRS 16

implementation

Building Near shoring and Offshoring Building up near shoring team which will move quickly across and support

implementation

Near shoring will comprise of Functional Consultant and Technical Architect

Building up common offshore to have knowledge sharing and smooth

implementation

Building up team to support multiple implementation and opportunities


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tech mahindra ifrs 15 introduction & offering · pdf filemodules of core hr , sshr , otl...

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