1. Revenue recognition – Implementation Phase and lessons learned
Revenue recognition
Revenue recognition – Implementation Phase and lessons learned

2. Today’s presenter Stephen D’Arcy
Managing Director, Enterprise Systems – Risk Assurance
Stephen is a leader in the National Enterprise Systems practice at PwC. Based in Southern California he is has over fourteen years of experience implementing software solutions within the Oracle eco system including Oracle EBS, PeopleSoft, Oracle Cloud and most recently RevPro for clients adopting ASC 606. Stephen recently led a large RMS implementation at a global professional services Organization across multiple different revenue streams. Stephen is a member of the PwC Global ERP Leadership committee tasked with innovating new products and services, developing ERP best practices, and developing training for Oracle applications.
Stephen has a dual B.A. and M.A. in Business and Economics B.S. from Trinity College Dublin, Ireland. Stephen's clients have included multiple Fortune 500 companies in the software, technology, cable, telecommunications, utilities and FS industries.

3. 1 2 3 4 5 6 7 Agenda What is the ASC606 Standard?
Implementation Options – Manual, Brute Force, Custom Apps, RMS
Understanding the Impact to Controls
Understanding the Impact to Management 5
Top Risks and Lessons Learned 6
Additional Considerations 7
Q&A

4. Polling question #1
When did/does the new revenue recognition accounting standard take effect for you organization? A
Already effective B
Later in 2018 C
2019

5. What is the ASC606 Standard? Why is it changing?
The new Rev Rec (Topic 606) standard will impact All companies.
Effective date will be 1/1/2018 for public companies and 1/1/2019 for private companies with calendar year end.
Principles based vs Rules based
The new standard will significantly impact the timing of revenue recognition in some cases.
Companies can choose one of two methods of adoption: fully retrospective and modified retrospective.
The new standard introduces extensive disclosure requirements.
Timing of Revenue recognition and impacts to disclosures could mean potential changes to systems/processes/controls.

6. Polling question #2
What stage is your organization at in your implementation of the new revenue recognition accounting standard? A
Assessing the impact B
Assessing the impact C
Project complete

7. Implementation options How are companies implementing the change?
Combination of the approaches above
Manual
Custom Application(s)
Brute-force
Revenue Management System

8. Financial reporting system
Illustrative example – Controls impact with automation Illustrative example
Existing systems
Staging
Revenue management systems
SAP
Oracle
Custom
Data Store
Translation GL
Financial reporting system

9. Alternative implementation – Manual “brute force” Illustrative example
Existing systems
Staging
Revenue management systems
SAP
Oracle
Custom GL
Models
Financial reporting system

10. Polling question #3 A B C D
Which of the following best describes your expected level of system or process change? A
None B
Low C
Moderate D
High

11. Understanding the impact to Controls
SDLC controls
Automated controls
Project Authorization
Technical documentation
User acceptance testing
Data conversion
Project go-live
Inherent functionality
Configurations
Cross functionality
Manual controls
ITGCs
Dependency on key reports
New or modified data elements
Access to programs and data
Change management
Computer operations (Batch processing and interface monitoring)

12. Understanding the impact to management SDLC Controls
Risks in SDLC
Control examples
Review and sign off of business requirements document prior to implementation
Develop testing and approval strategy for significant changes
Assess data conversion strategy, conversion accuracy, completeness reconciliation, and remediation of defects
Systems incompletely or inaccurately process data
Data migration is incomplete or inaccurate
Insufficient design and/or testing of design
Lack of data conversion strategy/validations of conversion

13. Understanding the impact to management Access to programs and data
Risks in access to programs and data
Control examples
Restrict administrative access (multiple levels/access points)
Periodically re-certify application access rights
Segregate master maintenance, sales orders, delivery, invoice processing, accounts receivable and RevPro/RevStream duties
Restrict maintain period access
Multiple points of sensitive data access points
Upstream Systems, Extraction Logic, Transformation Layer, RMS, Holding Tank, Downstream
Unauthorized access to applications
Unauthorized or erroneous changes or transactions to OS/DBs
Inappropriate access to period maintenance
Segregation of duties issues

14. Understanding the impact to management
Change management, batch processing, and interfaces
Risks in change management, batch processing, and interfaces
Control examples
Test and authorize changes prior to implementation
Configure, test, and monitor interfaces appropriately to ensure completeness and accuracy of data flow
Insufficient testing of changes to configurations, business rules, source code, master data
Transactions are not appropriately interfaced from source to target

15. Understanding the impact to management Automated controls
Risks in automated controls
Control examples
Define holds in business requirement document
Ensure adjustment entries for each arrangement net to zero
Configure customized SSP set up
Set up performance obligations templates
Define revenue and cost treatments
Establish contract modification rules
Inappropriate implementation of customizations to system logic and configurations per accounting policy
Application configuration decisions are not aligned throughout the process
Custom Applications/Excel Macros for brute force solutions are not appropriately controlled

16. Polling question #4
Which of the following implementation issues has created the biggest challenge for your organization? A
Disclosures B
Accounting policy changes C
Process and/or system changes

17. Top risks and lessons learned
Can we get to your contract data – is it clean and fit for purpose?
Data availability
Organizational change
Were changes managed upstream or in a vacuum at corporate?
RMS, manual, brute force, and custom apps – All have unique risks
Implementation approach
Other system implementation projects that impact 606 efforts, i.e: new source systems, data warehouses, reporting tools etc.
External dependencies
Ongoing controls: security controls, reconciliation controls, interface controls, automated controls (RMS), manual controls related to disclosures. SDLC are one time controls.
Controls

18. Top risks and lessons learned (continued)
Involve external auditors early on the process to maximize efforts. Leverage Internal Audit involvement from outset to design controls as the solution is built. External auditors may wait until post transition to involved if not encouraged to participate in the process.
Auditor involvement
Interfaces
Consider interfaces between new RMS system and legacy ERP and other applications.
Data Warehouse. Transformation Layer/Data Augmentation is generally in play – how do you get comfortable.
Data lake/ Holding tanks
System updates/patches
Software version and patch management – how do you control new versions being deployed in production while solution is being built?
RMS tools - RevPro, RevStream, SAP R&R, Oracle RMS.
New software vendors

19. Polling question #4
What do you expect your organization’s total implementation cost to be to for the revenue recognition change? A
Under $1M B
$1M – $5M C
$5M+

20. Additional considerations
When is/did the company excepted to adopt the new standard?
Are Finance and IT working together to understand the impact from a systems/processes/controls perspective?
Have they slotted in the required changes into the IT roadmap?
Schedule a meeting with your audit/target client, IT, and IA leaders.
Business models, product bundles and go-to market solutions – What changes should be expected?
Do upstream systems provide all necessary revenue attributes at the line level for revenue recognition and reporting?
IT function – Is IT involved at an early phase of the transition?
Current IT systems – Do they capture the right data for automation of revenue recognition?
ERP systems – Could it be upgraded to handle automation of revenue recognition?
Offline calculations – Should advanced versions be developed and implemented?
Program governance structure – Does it enable quick decision making across the functions?

21. Questions?

22. Thank you!
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