QAD Revenue Recognition Solution

Transcription

1 QAD September 2017 Launch/ MWUG Meeting QAD Revenue Recognition Solution Patrick Grace, QAD Solutions Consultant October 9 th, 2017

2 Safe Harbor Statement This presentation includes forward-looking statements about QAD and its business. These statements are subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in QAD s SEC filings, including the company's latest Annual Report on Form 10-K dated April 15, 2016 and in particular the section titled Risk Factors therein and other periodic reports the company files with the Securities and Exchange Commission thereafter. This presentation contains certain references to financial measures that have been adjusted to exclude certain expenses and other specified items. These financial measures differ from comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ( GAAP ) in that they exclude unusual or nonrecurring charges, losses, credits or gains. This presentation identifies the specific items excluded from the comparable GAAP financial measure in the calculation of each non-gaap financial measure. Management believes that financial presentations excluding the impact of these items provide useful supplemental information that is important to a proper understanding of the Company s business results by investors. These presentations should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-gaap financial measures presented by other companies. The following is intended to outline QAD s general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, functional capabilities, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functional capabilities described for QAD s products remains at the sole discretion of QAD. QAD undertakes no obligation to update forward-looking statements. 2

3 Agenda QAD Revenue Solution Background - Examples of Potentially Impacted Areas Revenue Solution Update Functionality Overview - Review Functionality Enhancements Current Development Status Summary Questions / Follow Up 3

4 QAD Revenue Recognition Background 4

5 Revenue Recognition: ASC 606 / IFRS 15 What is ASC 606/IFRS 15? Introduces new revenue recognition rules Merges US GAAP with IFRS Manufacturing companies required to comply Impact dependant on selling practices Global impact Change is coming! 5

6 Revenue Recognition: ASC 606 / IFRS 15 When will it come into effect? Public Companies - Annual reporting periods beginning after December 15, 2017 Private Companies - Annual reporting periods beginning after December 15, 2018 Customers should work with their Auditors! 6

7 Revenue Recognition: ASC 606 / IFRS 15 Market Research Many customers have not completed analysis - Majority of customers ascertain being unaffected Companies remain in holding pattern until more consensus in interpretations Might affect only specific cases - Automotive (Tooling & Engineering) - Medical (Bill and Hold) 3 Customer impact categories: - Likely no or minor impact - Confirmed impact - Likely impact but customer believes no impact Some customers may be affected a lot more than they currently think! 7

8 Revenue Recognition: ASC 606 / IFRS 15 Customers with Highest Likelihood of Being Affected US headquartered public companies - IFRS Required Reporting Multiple-element product offering Life sciences, Automotive and Industrial 8

9 Examples of Potentially Impacted Areas Interrelated goods & services on same sales order - Tooling & Engineering Interdependent items on the same sales order Changing prices during life of an order Provision of warranty with goods Sale of goods with: - volume discounts - rebates - financing arrangements - discounted settlement terms - sale or return basis L 9

10 Revenue Recognition: ASC 606 / IFRS 15 Wave Trade Offs Impact / Volume of Transaction Cost of Compliance Automated Processes Manual Processes L 10

11 Revenue Recognition Overview Historically limited support in QAD applications for revenue recognition Advent of ASC 606/IFRS 15 revenue recognition increased focus Development of QAD Revenue Solution - Automates existing and new requirements ASC 606 / IFRS 15 5 step approach to revenue recognition Identify contract with customer Identify performance obligations in contract Determine transaction price Allocate transaction price to performance obligations Recognize revenue when (or as) entity satisfies performance obligation 11

12 Standard and Advanced Revenue Recognition AREA Standard Revenue Recognition CUSTOMER REQUIREMENT Shipping plus days Invoicing plus days Periodic recognition over # months Confirmation of customer acceptance Advanced Revenue Recognition Percent complete recognition Allocate discounts equally Use ongoing estimates during contract Detailed reporting / disclosure in accounts 12

13 Revenue Recognition Challenges Solved Business Driver Customer Pain Industries High level overview of most common business drivers. Interrelated goods and services on same contract Sales of goods with discounts / rebates Medical bill and hold practices Automotive Tooling and Engineering charges What pain does this cause the customer? Revenue may need to be recognised only when all items are delivered Amount & timing of revenue recognition may change Revenue can be recognised before delivery to customer Charging customer for contractually agreed T&E services Which industries does this affect? Auto, LS, CP/ F&B Auto, LS, CP/ F&B LS Auto 13

14 Who Can Benefit and Value Who Can Benefit Value CEO, CFO Revenue Accountant/ Manager Revenue Official / Administrator Revenue standard compliance allows approval of financial statements by auditors Efficient processing of customer revenue in accounting system to agree with new revenue rules Streamlined processing of revenue transactions in accounting system with minimal manual effort 14

15 What s Unique About the Solution? Some 3 rd party packages have well defined revenue recognition functionality targeted at the software industry QAD Revenue Recognition solution targeted at manufacturing sector Functionality integrated with core processes Revenue sub ledger embedded in QAD Financials 15

16 QAD Revenue Recognition Solution Update 16

17 Revenue Recognition: ASC 606 / IFRS 15 QAD Offering Revenue Recognition Assessment - Services QScan Revenue Recognition Module - Enterprise Edition only, available March Embedded in QAD Financials Separate license required Revenue Recognition Services - Not a product, but a services offering - On Request - Starts with Services engagement - For SE/Pre-SE databases - Customer specific configuration 17

18 Revenue Recognition: ASC 606 / IFRS 15 Revenue Recognition Assessment Prerequisite: Auditor assessment of impact 1 Day on site assessment - Review current environment and revenue recognition process - Timing, project resource requirements and risks - Implications of new solution and potential options Evaluation and recommendations, including: - Software solutions (QAD / 3rd party) - Manual processing supported by offline spreadsheets - Customization of existing software - Process change recommendations 18

19 QAD Revenue Recognition Functionality Overview 19

20 Revenue Recognition Solution Enterprise Edition only solution R 20

21 Revenue Module Functionality Revenue contract creation Identify and create performance obligations Pre-defined revenue recognition rules Support for allocated transaction price Revenue recognition engine Detailed sub ledger transactions Audit trail on contract changes Management and statutory reporting 21

22 Revenue Contract Creation Revenue contract level above sales order Auto-generate contract from sales order Assign number automatically or manually 22

23 Identify Performance Obligations Performance obligations linkedto line items on sales order Revenue recognition rule assigned 23

24 Assign Revenue Recognition Rule Pre-defined rule types - #days from shipment/invoice - Customer acceptance - Percentage of completion - Periodic recognition - Receipt of payment 24

25 Determine Contract Value Sales order value assigned to contract Allocated transaction price after discounts Use of estimates for revenue calculation - Variable consideration 25

26 Recognize revenue Revenue recognition engine to process transactions - Batch processing Posts individual transactions to GL 26

27 Revenue Reporting Transactions recorded to Revenue Recognition daybooks Revenue transaction and invoice detail views to sub ledger Excel download consolidated contract transaction view Opening balance creation for new active contract in existence 27

28 Contract Versions Contract versions facilitate audit trail New version when update affecting calculation of revenue Revision to performance obligation - Add / delete - Revise revenue rule Versions maintained by date 28

29 Contract Review Process Allows documentation of review process Review can be manual or automatic Manual - Set in General tab with reason for review Automatic - Upon creation or new version created Review status is set as needs attention and approved 29

30 QAD Revenue Module Benefits Risk reduction - Replace manual processes - Audit trail - Improved visibility - Single vendor - Integrated system Reduce cost - Less expensive than manual processes and 3 rd party solutions 30

31 QAD Revenue Recognition Current Release / Development Status 31

32 Release Status Unique event in accounting world due to conceptual standard rather than rule based Customer & Auditor interpretation of new revenue rules ongoing Contact your Account Executive if you want to discuss in more detail 32

33 Current Development Status Enterprise Edition solution in limited availability mode QAD Financials released September - Available via backwards compatibility to EE earlier releases Automates standard and advanced requirements Discussing with interested customers participation limited availability program Customer requirements may guide future developments 33

34 Possible Future Scenarios Immediate applicability for selected group of customers Other customers not affected or compliance not possible Can continue with manual processes Auditors may not agree with limited interpretations and demand compliance May cause increased demand for automated revenue recognition solutions 34

35 Future Developments Services/project part of manufacturing companies keeps developing Move to subscription based revenue models Demand for revenue recognition solution keeps growing Many companies have customizations in the area of revenue recognition 35

36 Summary QAD Revenue Solution Background - Examples of Impacted Areas - Market research update - What s Unique? Revenue Solution Update Functionality Overview - Review Functionality Enhancements Current Development Status - Possible Future scenarios 36

37 For More Information Contact your QAD Account Executive 37

38 Questions? 38

39 p QAD Inc 39