Monday Jun 27, 2016

Part C. New Revenue Recognition – Disclosure, the Forgotten Implication

Tools

In a previous blog article (Series 1, part 6), I pointed out that the functionality of a multi-dimensional consolidation tool, like Oracle Hyperion Financial Management or Oracle Financial Consolidation and Close Cloud Service (FCCS), will assist in the transition phase adoption of the new revenue recognition guidelines. And, in concert with the capabilities built in to the ERP system, the consolidation tool is important to organization’s ability to measure and report revenue under the new recognition guidelines. But with the new revenue recognition rules, it is becoming increasingly important to report more than just the traditional consolidated financial statements.

In my discussion with Mike Malwitz, he mentioned that organizations are anxious for tools to help streamline the production of financial reports with supplemental details and narrative information.




Nigel Youell: “Mike, can you tell us about tools that will help with disclosure under the new revenue recognition guidelines? “

Mike Malwitz: “Sure, there are a few tools in the Oracle Hyperion Financial Close Management suite that should be considered for processing and reporting disclosure details under the new revenue recognition guidelines.

First, Supplemental Data Manager (SDM) is designed to collect, organize, update, edit, and manage supplemental data for financial analytical applications such as consolidation. SDM maintains the detailed multidimensional contract information and integrates it to the consolidation tool, where appropriate.

Most organizations want tools that provides intuitive and flexible authoring environment that provides easy access to Oracle and non-Oracle data from multiple on-premises and cloud sources. Ideally suited for these tasks, Enterprise Performance Reporting Cloud Services also offers a collaborative, workflow-driven environment for delivery of book-quality financial and management reports.

Finally, we’re also seeing that, under the new revenue recognition guidelines, organizations want to reduce risk of misstating revenue – automated reconciliation of revenue contract details would be advantageous. The Account Reconciliation Management module has helped companies reduce risk by introducing real-time visibility to the reconciliation process and it will prove to be an enabler for ensuring that the details of revenue contracts are properly qualified.”


To read Part A and Part B, click on the respective title.

Part A: New Revenue Recognition – Disclosure, the Forgotten Implication
Part B: New Revenue Recognition – Disclosure, the Forgotten Implication

To learn more about Enterprise Performance Management, click
here.

Friday Jun 10, 2016

Part B: New Revenue Recognition – Disclosure, the Forgotten Implication


I continue my conversation with Mike Malwitz, Principal Solutions Consultant at Oracle.

Nigel Youell: “Can you provide examples of different types of disclosures that an organization might choose to make?”

Mike Malwitz: “There is some guidance provided, but there are some options for what an organization might choose to present. Let me illustrate by building on an example from the FASB documentation.

A company, Clean-Around, offers cleaning and grounds maintenance services. On June 30, 20X7, they enter into a non-cancellable, two-year contract with a client to provide both services on an “as and when needed” basis, but to a maximum of four visits per month. The client agrees to a fixed price of $400 per month for these services.

For this contract, they would show revenue for 20X7 as $2,400 (6 months @ $400). But Clean-Around would also show, on the balance sheet, offsetting amounts of contract assets and contract liabilities for the future revenue expected to be recognized on this contract.
Clean-Around chooses to disclose its progress toward complete satisfaction of the performance obligation using a time-based measure. It discloses the amount of the contract’s transaction price that has not yet been recognized as revenue in a table:


Suppose, however, that Clean-Around has many (e.g., hundreds, thousands) similar contracts that offer various mixtures of cleaning and lawn maintenance services. Obviously, supplementary disclosure of each contract in this fashion isn’t practical. In fact, the new revenue recognition guidance provides some flexibility in how Clean-Around might choose to disclose information on these contracts. To provide meaningful information to the reader of the annual report, Clean-Around has chosen to disclose summarized future revenue by service segment and by geographic segment:



Clean-Around determined the categories used in the investor presentations to meet the objectives of the disclosure requirement to disaggregate revenue from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.”


To read Part A and part C, click on the respective title.

Part A: New Revenue Recognition – Disclosure, the Forgotten Implication
Part C: New Revenue Recognition – Disclosure, the Forgotten Implication

To learn more about Enterprise Performance Management, click
here.





Thursday May 26, 2016

Part A: New Revenue Recognition–Disclosure, the Forgotten Implication

Part A - Overview

I was speaking with Mike Malwitz, Principal Solutions Consultant at Oracle, and I asked him about concerns that he has heard from organizations recently around the new revenue recognition guidelines. His responses were illuminating. 




Nigel Youell: “Organizations have been busy figuring out how to recognize and measure revenue under the new guidelines set out by FASB and IASB, but are there other impacts they should be considering?”

Mike Malwitz: “I’m hearing a lot of concerns, from the people with whom I am talking, about the level of contract revenue detail that is to be disclosed. That shouldn’t be a big surprise since investors and other users of financial statements have consistently indicated that revenue disclosure requirements in both the existing U.S. GAAP and IFRS were insufficient for analyzing an entity’s revenue.”

NY: “So what are the intentions for disclosure under the new revenue recognition guidelines?”

MM: “Disclosure requirements under the new revenue guidelines are intended to provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts. Affected organizations are expected to provide information about: 



  • Revenue recognized from contracts with customers, including the disaggregation of revenue into appropriate categories; 

  • Contract balances, including the opening and closing balances of receivables, contract assets, and contract liabilities;

  • Performance obligations, including when the entity typically satisfies its performance obligations and the transaction price that is allocated to the remaining performance obligations in a contract;

  • Significant judgments, and changes in judgments, made in applying the requirements to those contracts. In many cases, organizations will be required to report information that they may not have previously monitored.”


NY: “Is this a major shift in thinking from the current guidelines?”

MM: “Current revenue recognition guidance under both IFRS and US GAAP is limited. The new disclosure requirements reflect the belief that disclosure should be more than just a compliance exercise. Companies need to apply a thought process to disclosure and disclose sufficient information about their judgments and their approach to help users gain an accurate understanding of the numbers in the financial statements. This means qualitative information is just as important as quantitative information for helping the reviewer better understand the nature of the organization’s contract revenue.”

To read part 2 and part 3, click on the respective title.

Part 2: New Revenue Recognition – Disclosure, the Forgotten Implication
Part 3: New Revenue Recognition – Disclosure, the Forgotten Implication

To learn more about Enterprise Performance Management, click
here.

Wednesday Nov 09, 2011

What's New with XBRL?

The answer is – quite a bit!  Over the past 2 months I had the chance to attend and speak at the XBRL US Conference in Nashville, as well as the XBRL International Conference in Montreal.  The adoption of XBRL as an electronic standard for business communications is accelerating around the world, with many companies adopting it for financial reporting and many new projects underway.  Here are the highlights and key points I took away from the two conferences.


XBRL US Conference – The XBRL US National Conference for 2011 was held in Nashville September 26 – 27th at the Gaylord Opryland Resort.  The conference had about 300 attendees, roughly half of which were accounting/finance staff from corporate filers, and the rest representing vendors, consultants and service providers.  Before the conference started, XBRL US held its Committee and General Members meetings.  The conference agenda included general sessions with keynotes and panel discussions on various topics, as well as XBRL Essentials Training sessions for corporate filers.


Some of the highlights from general sessions included:



  • Public Company Viewpoint – Frank Brod – Chief Accounting Officer, Microsoft

  • Regulatory Viewpoint - Mike Starr - Deputy Chief Accountant, US SEC

  • XBRL Panel:  Beyond the SEC - Corporate Use of XBRL to Communicate with Other Regulators, Industry Groups and Other Stakeholders

  • XBRL Panel:  Investor Communications

  • Corporate Competitive Analysis Panel

  • Corporate Actions Panel


Key takeaways from the sessions included:


By integrating XBRL with the financial close process, Microsoft reduced the reporting cycle – released earnings sooner, 10Q on day 20, late changes to filings are supported through in-house projects.  Microsoft filings posted in HTML on Investor Relations site, with XBRL data source  


The US SEC says there will be 6500 active filers by the end of 2011, 8300 when all are phased in.  Foreign filers are waiting on the IFRS taxonomy to be approved – SEC anticipates approval of IFRS taxonomy in first half 2012.  Concerns:  detailed tagging, concurrent filings, capacity.  Benefits:  easier analysis, identify outliers, easier to consume disclosures, more software licenses.  Trends:  costs will drop, in-house tagging will increase, more authoring and consumption tools, industry group standards, clearer disclosures.  Expectation that industry extensions and disclosure formats will standardize over time.


XBRL has made it easier for regulators like the FDIC to consume and analyze bank filings.  Easier for the banks to file since XBRL handles many calculations


Corporate filers expect to see more benefits when XBRL can be used to file with multiple agencies/regulators.  In other countries, Standardized Business Reporting (SBR) efforts are yielding results with multiple agencies either mandating XBRL or accepting on a voluntary basis – i.e. Australia, Belgium etc.


Aggregators are using XBRL data – massaging to provide consistency across companies, analysts and investors starting to leverage XBRL data directly and from aggregators.  Some concerns about data consistency with extensions.  Tagging of earnings press releases would be helpful to investors and analysts.  Industry taxonomies will help improve comparability.


XBRL Essentials Training classes included:



  • Essentials Basics:  Seleting the Right Tag

  • Essentials Basics:  Checking Your Work

  • Essentials Basics:  Managing the Process

  • Essentials Basics:  XBRL Controls Process

  • Essentials Advanced:  Getting into the Details – With Detailed Footnote Tagging

  • Essentials Advanced:  Outsource vs. In-House XBRL Creation

  • Essentials Advanced:  Crossing the Finish Line – Process, Timing and Quality Control

  • Essentials Advanced:  What Comes Next:  Transitioning to a New Taxonomy Release


This conference has grown substantially over the past few years and now has a critical mass of corporate filers who are attending to get information on XBRL and attend the XBRL Essentials training.  Here’s a link to videos of the keynotes, and copies of all of the presentation and training materials:


http://xbrl.us/events/Pages/natconf2011/schedule.aspx


XBRL International Conference - The XBRL23 International Conference was held in Montreal, Canada October 25 – 27th at the Le Sheraton Centre.  The theme for the conference was “Enhancing Business Performance”.  The conference had about 300 attendees, including regulators, banks, agencies, and XBRL practitioners from the US, Canada, Europe and Asia. 


The conference started with the XBRL International Committee meetings on Monday, then conference sessions and exhibits Tuesday through Thursday.      Here are some of the session highlights:



  • The State of XBRL International

  • Roadmap to XBRL Adoption in Canada

  • UAE:  Securities and Commodities Authority Implementation Project

  • IFRS Convergence in Canada and the IFRS Taxonomy

  • The Implications of XBRL for Financial Statement Audit

  • Update on XBRL Activities at the IASB and IFRS Foundation

  • Risk, OCEG, GRC-XML, Solvency II

  • Launch of the XBRL Abstract Model as Public Working Draft

  • Standard Business Reporting:  SBR and IFRS

  • Deeper XBRL – XBRL’s Global Ledger Framework

  • Climate Change Reporting Taxonomy – Towards Integrated Reporting

  • Improving the Usefulness and Relevance of XBRL-Tagged Data

  • The Evolution to Integrated Reporting

  • First Canadian end-to-end XBRL Implementation – Deposit Insurance Corp.

  • Corporate Actions Project Panel

  • Insurance Project:  Bermuda Monetary Authority Case Study – including Solvency II

  • Global Reporting Initiative Taxonomy

  • Tax Project:  Creation and filing of Inline XBRL in the UK

  • Integrated Reporting in South Africa

  • US GAAP Taxonomy Project:  FASB Best Practices


As you can see from the session list above, there are many different XBRL projects underway around the world, and some of them overlap – i.e. Climate Change Taxonomy vs. GRI Taxonomy for Sustainability Reporting.  There were a number of sessions on Integrated Reporting and how to combine financial statement information with non-financial data tagged in XBRL with different taxonomies.  A number of countries are moving forward with Standard Business Reporting (SBR) where multiple regulators are adopting the XBRL Standard (e.g. Belgium, Netherlands, Australia).   There is also growing interest in Solvency II with the EIOPA mandate (European Insurance Occupational Pensions Authority).


Here’s a link to the XBRL International web site where you can find additional information these global projects:  http://www.xbrl.org/


What’s Oracle up to regarding XBRL? 


Oracle is providing solutions to support both the production and consumption sides of XBRL.  On the production side, we provide Oracle Hyperion Disclosure Management and on the consumption side we have the XBRL Extension for Oracle Database 11g.  Information about these solutions can be found on the Oracle web site:


Oracle Hyperion Disclosure Management: http://www.oracle.com/us/solutions/ent-performance-bi/disclosure-management-065892.html


Oracle Database XBRL Extension:  http://www.oracle.com/technetwork/database/features/xmldb/index-087631.html


I hope this information is helpful – let me know if you have any comments or questions.

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