Record Revenue @ Daily Rate[A Deep Dive into Daily Revenue Recognition Options in Oracle Receivables]

Presenter:

Anil Madhireddy

VeriSign Inc

Key Contributors:

Rajendra Sathe

Gautam Ramakrishna

VeriSign Inc

About Us• VeriSign Inc (NASDAQ: VRSN) is the trusted provider of Internet

infrastructure services for the networked world. VeriSign brings Trust to the Internet with domain name and authentication services allowing companies and consumers all over the world engaged in trusted

communications and commerce

• Anil Madhireddy is Manager – Business Systems Analysis & solution architect for the Daily Revenue solution @ VeriSign.

• Rajendra Sathe is the Lead Business Analyst on the Daily Revenueproject @ VeriSign & a key contributor

• Gautam Ramakrishna is a Senior Developer @ VeriSign & the technical architect who helped design APIs for the Deferred Revenue solution & also co-authored the whitepaper on this topic.

Agenda / Session Objectives

� Deep dive into Daily Rate Revenue Recognition features in Oracle EBS & expected functionality

� Understand the two variants of Daily Revenue Recognition rules offered by Oracle AR

� Learn the detailed configuration required to implement Daily Revenue Recognition

� Drilldown on Daily Revenue scenarios with case study discussions

� Quick Overview of Revenue Accounting Form

� Challenges that implementers need to prepare for & patching required

Revenue Recognition - What GAAP says!

• Revenue Recognition is different from Invoice Presentment– Revenue should not be recognized until it is

realized or realizable and earned (SAB 101)

• When Revenue is considered to have been earned?– When the entity has substantially accomplished what it must do to

be entitled to the benefits represented by the revenues (SAB 101)

• Revenue Recognition criteria (all needs to be met) – Persuasive evidence of an arrangement exists,

– Delivery has occurred or services have been rendered,

– The seller's price to the buyer is fixed or determinable, and

– Collectibility is reasonably assured.

Revenue Recognition: Timing Options

Revenue Recognition: Calculation Options

Daily Revenue – Flavors

• Daily Revenue Rate, All Periods• Delivers the most precise revenue recognition schedule

possible

• Revenue for all months calculated at Daily Rate• Revenue Amount = [# of days in the period / Total # of days] *

Total Revenue Amount

• Daily Revenue Rate, Partial Periods• Delivers the most precise revenue recognition schedule for the

partial periods – first and last period• Revenue for partial periods calculated at Daily Rate

• First & Last Period: – Revenue Amount = [# of days in the period / Total # of

days] * Total Revenue Amount

• Remaining Period: – Remaining Revenue evenly spread on remaining periods

Revenue Calculations – Daily Rules vs. Standard Rules

Accounting Rule Types

Setup – Accounting Rule – Daily / All Periods

� NAV: Receivables -> Setup -> Accounting Rule

Setup – Accounting Rule – Daily / Partial Periods

� NAV: Receivables -> Setup -> Accounting Rule

Transaction with Daily All Periods Rule

� NAV: Receivables -> Transactions -> Transaction

Transaction with Daily Partial Periods Rule

� NAV: Receivables -> Transactions -> Transaction

Daily Revenue Scenarios

S1 – Rule Start Date & Duration Known

• Daily [Non-Deferred] Revenue Recognition Rules apply

� Daily All Periods or Daily Partial Periods

• Start Date Scenariosa) Rule Start Date in the Past

� Revenue Recognition begin in current period - AR will catch up revenue for the past periods in the current period (assuming the prior periods are closed)

b) Rule Start Date in the current period � Revenue Recognition begins in the current period (standard

scenario)

c) Rule Start Date in the future period� Revenue Recognition happens on the given future date

S2 – Rule Start Unknown & Duration Known

• Use Deferred Revenue Recognition Rules� Daily All Periods / Daily Partial Periods

� Check Deferred Revenue checkbox

• Alternatively, Use Revenue Contingencies• Time Based (Refund Policy)

• Event Based (Customer Acceptance, Cash Payment)

• Use Revenue Accounting Form� Manually Trigger revenue using Revenue Accounting Form

� Use original GL Date on Invoice or Provide new GL date at the time of triggering revenue

• Revenue Accounting API� Automated way of triggering revenue [Details in Appendix B

of White Paper]

Revenue Accounting Form

[Find Transactions] �NAV: Receivables -> Control -> Accounting -> Revenue Accounting

Revenue Accounting Form

[Manage Revenue]

Revenue Accounting Form

[Schedule Revenue]

Revenue Accounting Form

[Enter Amount / GL Date]

Revenue Accounting Form

[Review & Save]

S3 – Rule Start Date Known & Duration Unknown

S4 – Rule Start Date Unknown & Duration Unknown

• Revenue Accounting Form doesn’t deliver functionality to meet this scenarios

• Standard usage of Revenue Accounting API also doesn’t permit changing of duration of accounting rule assigned to the Invoice

• Workaround�Use 1 Mo period deferred accounting rule for all

transactions where duration is unknown

�Use Revenue Accounting API and use custom logic to determine revenue amount per period

�Details in Appendix A of White Paper

Daily Rate Revenue - Benefits

• More precise calculation of Revenue

• Eliminates manual entries to adjust revenue entries in GL to be GAAP compliant

• Fulfills the stringent accounting standards introduced by the US GAAP and the Sarbanes-Oxley Act for recognizing revenue

• Since Daily Rate Rules are variable duration rules, they help in reduction of accounting rules

• Daily Rate Rule may lead to SKU reduction

• Flexibility to chose from All Periods or Partial Period application of Daily Rate Rules

References:

• Record Revenue @ Daily Rate [Whitepaper]– Appendix A & B provide case studies & technical details on

Revenue Accounting API

• Complying with SOP 97-2: Utilizing Daily Revenue Recognition in Oracle EBS 11.5.10 and Beyond – By Mike Ivers

• Revenue Management Enhancement: Daily Revenue [Metalink Note: ID 401000.1]

• For COGS Deferrals: EBS Cost Management Data Flow in Sub Ledger Accounting & Deferring COGS– By Dharmalingam Kandampalayam (Dharma)

Q & A

•Please remember to complete the Survey Form!

• Contact:Anil Madhireddy

http://www.linkedin.com/pub/anil-madhireddy/4/21a/15b