Normal
0
false
false
false
EN-US
X-NONE
X-NONE
Revenue
is a fundamental yardstick of a company's performance, and one of the most
important metrics for investors in the capital markets. So it’s no surprise
that the accounting standard boards have devoted significant resources to this
topic, with a key goal of ensuring that companies use a consistent method of
recognizing revenue.
Due
to the myriad of revenue-generating transactions, and the divergent ways
organizations recognize revenue today, the IFRS and FASB have been working for
12 years on a common set of accounting standards that apply to all industries
in virtually all countries. Through their joint efforts on May 28, 2014 the
FASB and IFRS released the IFRS 15 / ASU 2014-9 (Revenue from Contracts with
Customers) converged accounting standard.
This
standard applies to revenue in all public companies, but heavily impacts
organizations in any industry that might have complex sales contracts with
multiple distinct deliverables (obligations). For example, an auto dealer who
bundles free service with the sale of a car can only recognize the service
revenue once the owner of the car brings it in for work. Similarly, high-tech
companies that bundle software licenses, consulting, and support services on a
sales contract will recognize bundled service revenue once the services are
delivered. Now all companies need to review their revenue for hidden bundling
and implicit obligations.
Numerous
time-consuming and judgmental activities must be performed to properly recognize revenue for complex sales
contracts. To illustrate, after the contract is identified, organizations must
identify and examine the distinct deliverables, determine the estimated selling
price (ESP) for each deliverable, then allocate the total contract price to each
deliverable based on the ESPs.
In
terms of accounting, organizations must determine whether the goods or services
have been delivered or performed to the customer’s satisfaction, then either
book revenue in the current period or record a liability for the obligation if
revenue will be recognized in a future accounting period.
Oracle
Revenue Management Cloud was architected and developed so organizations can
simplify and streamline revenue recognition. Among other capabilities, the
solution uses business rules to efficiently identify and examine contracts,
intelligently calculate and allocate deliverable prices based on prescribed
inputs, and accurately recognize revenue for each deliverable based on customer
satisfaction.
"Oracle
works very closely with our customers, the Big 4 accounting firms, and the
accounting standard boards to deliver an adaptive, comprehensive, new
generation revenue recognition solution,” said Rondy Ng, Senior Vice President,
Applications Development. “With the recently announced IFRS 15 / ASU 2014-9,
Oracle is ready to support customer adoption of the new standard with our
Revenue Management Cloud,” said Rondy.
Oracle
Revenue Management Cloud, an integral part of Oracle Financials Cloud, helps
organizations comply with accounting standards, provides them with confidence
that reported revenue is materially accurate, and simplifies the accounting
process for revenue recognition.
Stay tuned to this blog for regular updates on Oracle Revenue Management Cloud. We also invite you to review our new oracle.com ERP pages @ oracle.com/erp. We will be updating these pages very soon with more information about Oracle Revenue Management Cloud.
