Revenue Recognition in Compliance With ASC 606 and IFRS 15
Automate, Comply, Simplify
For years, ERP and other financial systems have existed as a one-size-fits-all solution to back-office finance. Regulations such as ASC 606 and IFRS 15, the Subscription Billing Economy, the Internet of Things (IoT), and other factors have introduced substantial complexity in revenue recognition. This has often led to a need for extensive customizations and the use of spreadsheets to fill multiple gaps. The result has been high cost to upgrade resulting in vendor and version lock-in, a lack of transparency and auditability, and significantly increased risk of error or non-compliance.
Many of these systems were designed to perform revenue recognition after generation of the invoice, an approach that is fundamentally altered under ASC 606 and IFRS 15. Businesses want more automation, fewer customizations, fewer spreadsheets, and a continuous upgrade path so that they can retain business agility without being slowed by back-office operations.
Aria Revenue, powered by SOFTRAX, offers these capabilities via a purpose-built solution designed specifically for ASC 606 and IFRS 15 and representing a new era in revenue recognition. Aria Revenue includes a revenue subledger with full period controls capability. The proprietary policy engine underlying Aria Revenue is capable of fully automating even the most complex revenue treatments. It is designed to take in data related to revenue recognition from any number of upstream systems. This includes order, fulfillment, billing, and post-processing or change event data. The policy engine enables a touch-less approach, even in the context of complex revenue recognition. The point and click nature of policy creation gives business users direct control over revenue treatments rather than requiring IT to affect such policies.
At its core, Aria Revenue, powered by SOFTRAX, is the world’s most comprehensive configuration and functional solution, which sits atop an advanced revenue sub-ledger with full period controls. Aria Revenue creates summary or detailed journal entries that pass directly to your General Ledger.
Aria Revenue draws on SOFTRAX’s 20+ years providing innovative revenue management systems that withstand changes in business models and the regulatory environment. The point-and-click configuration, integrated workflow engine, and powerful analytics provide the end user with a solution that takes the arduous work out of revenue recognition and closing the books. It is designed to be the solution you never have to replace, easily handling a growing business now and future scale and complexity:
- Deferred revenue management
- Contract Asset & Liability accounting
- Automated calculation of Stand-Alone Selling Price (SSP)
- Allocation against SSP
- Policy-driven and dynamic unbundling (aka carving) capabilities
- Ability to place revenue on-hold with conditions that must be satisfied prior to allowing revenue recognition
- Automatic Contract Modification & Combination
- Foreign Currency Translation
- Robust Audit Support
- Dual or Multi Reporting (Account Books)
- Cost Capitalization
- Variable Consideration
- Material Rights
- Significant Financing Component
The five steps of Revenue Recognition according to ASC 606/IFRS 15, are:
- Identify the contract(s) with Customers
- Identify the performance obligations in the contract
- Determine the transaction price (e.g. TCV), Assign SSP, Accounts, Schedules
- Allocate the transaction price to the Performance Obligations (POBs)
- Recognize revenue as entity satisfies POBs
Integration
Aria Revenue, powered by SOFTRAX, is a robust revenue sub-ledger. Designed to separate the order-to-cash and order-to-revenue processes and constructed for compliance with current and future revenue guidance, Aria Revenue is source system-agnostic. It optionally receives order, invoice, and fulfillment data to fully automate your revenue recognition policy.
As noted by the five steps of ASC 606, transactional revenue and contract data is brought in from an upstream sales order, ERP, CPQ, CRM, or potentially multiple source systems, then examined to create the necessary performance obligations to begin the revenue recognition process, per your company’s stated policies. Pre-configured revenue policies optionally orchestrate the proper assignment of accounts, schedule of recognition, unbundling, allocation, and other revenue treatments.
Furthermore, fulfillment systems and Aria Billing send data to the sub-ledger to automate the application of this data against the revenue. Summary journal entries are automatically constructed at the period close or in the period to capture the impact of all these events on the accounts in the subledger. These journal entries are then passed to the General Ledger.
Aria Revenue’s abilities to easily integrate with multiple sources and/or target systems, policy-driven automation that empowers business users, robust features, and functionality to meet the ever-growing complexities of ASC 606 and IFRS 15, along with world-class integration reporting, and auditing tools, cover all bases to meet your company’s needs today and tomorrow.