How to Utilize the New JD Edwards Revenue Recognition Functionality in Job Cost and Contract Billing

Transcription

1 How to Utilize the New JD Edwards Revenue Recognition Functionality in Job Cost and Contract Billing Session ID#: August 16, 2017 Prepared by: Name: Craig Davied Title: Director Company: Grant Thornton, LLP #JDEINFOCUS or add your own Twitter handle

2 Craig Davied Director, Technology Solutions Kansas City, MO Executive summary Craig is a Director with Grant Thornton in the Technology Solutions practice. He has over 18 years of consulting experience, across a diverse set of companies and industries. Craig's experiences include planning and program management of multi-faceted implementation projects, hands on management and implementation of ERP software packages, business process reengineering and system architecture design. Prior to Grant Thornton, Craig was a founding member of MarketSphere s JD Edwards practice in 2002 and was responsible for managing and delivering projects, practice development, solution design and staff management. He has deep experience with the processes and configuration of the JDE Finance and Distribution modules, specifically with the General Ledger, Accounts Payable, Accounts Receivable, Job Cost, Contract Billing, Procurement / Subcontracts, Sales, Inventory, and Advanced Pricing. Craig also has experience with multiple releases of the software. Prior to joining Grant Thornton Consulting from MarketSphere, Craig was an experienced consultant in a Big 5 consulting organization and has over 18 years of professional experience. Industries Consumer Products Retail Metals and Mining Mineral Exploration Drilling Construction Water Management Aggregates Pet Food/Manufacturing Textiles Public Utilities Inbound / Outbound Transportation Education Bachelor of Science in Business Administration / Finance, Kansas State University 2

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4 Technology Solutions Creating business harmony in the cloud

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7 About Grant Thornton JD Edwards Practice 80+ dedicated professionals Specialized functional resources PM and functional expertise Project management office Implementations Upgrades Mobile applications Third party integration architecture Business process reengineering Managed services (functional) Distribution Manufacturing HR / Payroll CAM Project advisory THOUGHT LEADERSHIP Leading presenter at COLLABORATE, INFOCUS and OpenWorld conferences with dozens of education sessions spanning a broad range of topics ERP governance and data governance white papers and thought leadership series Featured in PROFIT magazine JD Edwards Special Issue 2015 User materials and training Financials EXPERIENCE AND RECOGNITION CNC Development Technical Workflow Managed services (technical) Security management Private cloud Technical management Database management Trusted business advisor Infrastructure / hosting Disaster recovery Security Development (FRICE) Gap assessment Data governance Transformation Master data management Industry point of view Reporting strategy Proven methodology Process excellence Benchmarking ERP governance Change management Cloud roadmap / strategy FASB planning Chart of accounts optimization More than 200 JD Edwards implementations and upgrades Oracle JD Edwards recognized Grant Thornton with its 2015 JD Edwards Partner Excellence Award for Outstanding Upgrades and 2016 JD Edwards Partner Excellence Award for Vertical Industries

8 Program Agenda Objectives Business Problem The New Standard Overview of Functionality Job Cost a) Setup b) Profit Recognition c) Summary 6. Contract Billing a) Setup b) Examples c) Summary 7. Revenue Recognition Audit 8

9 Objectives

10 Objectives Briefly discuss the business situation at hand & how we arrived here today Discuss the new functionality in JD Edwards EnterpriseOne in the Job Cost and Contract & Service Billing modules Show examples to demonstrate the new functionality

11 Business Problem

12 Business Problem Business process requirements to recognize revenue separate from invoicing New Revenue Recognition Standard to be in effect for Fiscal Year 2018 for Public companies with early adoption in 2017 Convergence of IFRS and US GAAP revenue recognition standards Created via a collaboration between the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) Replaces all existing revenue recognition standards All Industries and Countries Exceptions are the Insurance and Lease Vendor industries New Revenue Recognition Standard to be in effect for Fiscal Year 2019 for Private companies with early adoption in 2018 Updates to Project Costing, Accounts Receivable and Sales Order Processing added additional flexibility to recognize revenue.

13 The New Standard

14 The New Standard Why did this change occur? The Financial Accounting Standards Board and the International Accounting Standards Board initiated a joint project to clarify the principles to recognize revenue and develop a common revenue standard for U.S. GAAP and IFRS that would: Remove inconsistencies and weaknesses in revenue requirements. Provide a more robust framework for addressing revenue issues. Standardize revenue recognition practices across entities, industries, jurisdictions, and capital markets. Provide more useful information to users of financial statements through improved disclosure requirements. Simplify the preparation of financial statements by reducing the number of guidelines to which an entity must refer.

15 The New Standard What should I do next? 1. Discuss the new standards with your auditors or other trusted advisors 2. Review publications from audit companies and other sources 3. Analyze your company's revenue related transactions against the standard 4. Study how the current JD Edwards software and enhancements will enable this change

16 Overview of Rev Rec Functionality in JDE Benefits Comply with Revenue Recognition Accounting Standards and Business Processes Identify and track your contracts and performance obligations Recognize revenue only when the performance obligation is complete Accurately reflect performance liabilities and revenue on your Balance Sheet and Income Statement Minimize Impact to Current Business Process The system determines which invoices need to go through revenue recognition versus your staff Transparent to users that process invoices or sales orders Provided in all JD Edwards EnterpriseOne processes that create or update invoices Flexible Setup Flexible setup to identify those invoices that need to go the process based upon your companies business process Choose which companies use the functionality based upon your business needs Track performance obligations on contracts and change orders more easily

17 Overview of Functionality Job Cost

18 Overview of Functionality New features in JDE Job Cost for Revenue Recognition Identify multiple revenue performance obligations within single job Assign a range of accounts or numerous accounts to a performance obligation Accurately recognize revenue for performance obligation using the performance obligation profit recognition process

19 Job Cost: Setup

20 Job Cost: Setup Process Flow Here is the typical Job Cost system process within JD Edwards: Job setup For integration with purchasing / subcontracts 2 1 Setup customer billing address Specific accounts needed to track costs Assign job # and general job info 4 3 Create job master Setup job site address $$/units assigned to accounts 5 Setup Job Accounts Setup Job budgets Job setup is complete in JDE; Work begins on jobsite 6 7 Actual transactions Payroll A/P vouchers Inventory issues Equipment entries Purchasing/subcontracts 8 Enter progress quantities (optional) 9 Invoice customer 10 Month end profit recognition Close job Job analysis

21 Job Cost: Setup Data Flow Setup Job Cost Set Month-End Processing/JEs RPO Master Data & AAI s F0006 Business Unit Master F5102 RPO Master Stores RPO Header F0901 Account Master F5103 RPO Detail Stores RPO Account Information F0902 Account Balances (Budget) F5104 RPO AAI Criteria Stores RPO AAI Information Profit Recognition F5144 Profit Recognition Records generated by R51800 F5145 Profit Recognition Account Balance Records generated by R51800 General Ledger F0911 Account Ledger F0902 Account Balances System validation: Any cost code and cost type combination entered, cannot be associated with another RPO

22 Job Cost: Setup Revenue Performance Obligation (RPO) Key Features Revenue Performance Obligation: A collection of accounts used to record costs and revenue within a job Each RPO Master record is assigned an RPO number Create Revenue Performance Obligations (RPO) at different levels of the Job/Project Create AAI s for the RPO to direct accounting entries to correct accounts System will use RPO AAI s during the Profit Recognition Build RPO Master contains numerous description fields and category codes for RPO categorization Deleting an RPO Master record will delete the associated detail records

23 Job Cost: Setup Performance Obligation Header and Detail Entering Revenue Performance Obligations Revenue Performance Obligation Program Create RPO Master and Detail records Header record stored in the F5102 Table Designate the RPO Number Alphanumeric value entered in by user, not based on a next number RPO Job Many to One relationship Can have accounts on multiple RPOs Various tabs to enter additional information Dates Cat codes Address Book records

24 Job Cost: Setup Performance Obligation Header and Detail Revenue Performance Obligation Details Program Enter or look up the Cost Code & Cost Type within the designated job System will validate that any account entered is not associated with another RPO System will store account detail information in the RPO Detail Table F5103 Deleting an RPO Header will delete the associated detail records from the F5103 table

25 Job Cost: Setup Performance Obligation AAIs Setting Up Revenue Performance Obligation AAIs Revenue Performance Obligation Program AAIs must be defined based on a AAI Item, match level, and match value AAI Item Value from UDC 51/RM that defines the account range and type for the particular AAI AAI Match Level - Value from UDC 51/TY that the system uses to determine the account details for the profit recognition process Determines the order in which the system searches for the RPO AAIs AAI Match Value Enter a value that the system will use in combination with the match level to locate the account details Match value fields determined by match level

26 Job Cost: Setup Performance Obligation AAIs Setting Up Revenue Performance Obligation AAIs AAI Item Values: Value AAI Item Value AAI Item 001 Cost Account (JCST) 010 Offset-Loss (BSLOSS) 002 Revenue Account (JCCA) 011 Accrued Cost (JCAPC) 003 Balance Sheet (BS) 012 Deferred Cost (JCSMJ) 004 Income Statement (IS) 013 Offset-Accrued Cost (JCAPO) 005 Overbilling (JCBE) 014 Offset-Deferred Cost (JCSMI) 006 Underbilling (JCCE) 015 Adj-Prj Final Cost (JCPFC) 007 Adj-Cost of Sales (JCBOUA) 016 Adj-Prj Final Profit (JCPFP) 008 Adj-Revenue (JCCOUA) 017 Adj-Prj Final Profit (JCPFP) 009 Loss (JCLOSS) 018 Adj-Prj Final Revenue (JCPFR)

27 Job Cost: Setup Performance Obligation AAIs Setting Up Revenue Performance Obligation AAIs AAI Match Values: Example: An AAI Match Value of 1 will require the user to enter the RPO that the AAI is should apply or match to Value AAI Item 1 Revenue Performance Obligation 2 RPO Category Code 3 Job 4 Job Category Code 5 Job Type 6 Project 7 Company 8 Default

28 Job Cost: Setup Performance Obligation AAIs Setting Up Revenue Performance Obligation AAIs Revenue Performance Obligation Program AAI s that correspond to an AAI Item of Cost (001) or revenue (002) use the following fields to define the cost code and cost type accounts From Cost Code Thru Cost Code From Cost Type Thru Cost Type AAIs that are used for accounts other than cost or revenue accounts use the following fields to define resulting accounts: Resulting Business unit Resulting Object (Cost type) Resulting Subsidiary (Cost Code)

29 Job Cost: Setup Performance Obligation AAIs Setting Up Revenue Performance Obligation AAIs AAI Item 1 Cost Account AAI Example:

30 Job Cost: Setup Performance Obligation AAIs Setting Up Revenue Performance Obligation AAIs AAI Item 3 Balance Sheet Account AAI Example:

31 Job Cost: Profit Recognition

32 Job Cost: Profit Recognition Generate Profit Build Generating and Revising Profit recognition data for RPOs Profit Recognition Build Report Calculates the following values: Actual Amounts Budget Amounts Projected Final Values Percent Complete Can be ran in proof or final mode Final Mode will create entries in the following tables: Profit Recognition Table F5144 Profit Recognition Account Balance F5145

33 Job Cost: Profit Recognition Generate Profit Build Generating and Revising Profit recognition data for RPOs Profit Recognition Build Report To run at the RPO Level, Summarization processing option = 4 Threshold - Will determine when to start recognizing profit for the RPO by comparing the threshold against the RPO % complete System will store data in the F5144 and F5145 tables RPO Number = Subledger Type P Single Adjustments Program Used to make adjustments to profit recognition data at the RPO level Does not allow adding or deleting records, only revisions Allows user to revise amount for individual accounts in the profit recognition information Update projected final amounts for an RPO System will utilize recognition method to update related fields

34 Job Cost: Profit Recognition Create Journal Entries Creating Performance Obligation Journal Entries for RPOs Create Journal Entries Program System will use vales in the profit recognition table F5144 to determine JE for the RPO Will use the RPO AAI s to determine accounts to use for journal entries Records must exist in the F5144 table at the RPO level Generated by the Profit Build Report at summarization level = 4

35 Job Cost: Profit Recognition Job Setup: Things to Remember Job Cost operational process does not change Additional new setup/files to handle Rev Rec Each job cost account can be associated with 1 RPO Therefore, you need to analyze your Cost Code Structures You will need multiple job billing accounts for each RPO for Profit Recognition

36 Job Cost: Summary

37 Summary: Job Cost Revenue Performance Obligation Summary Set up RPO Record Set up RPO AAIs Run Profit Recognition Create Journal Entries Create RPO Header Record Assign Accounts to RPO Detail Record Determine AAI Level Assign Match Type for AAI Criteria Define Match Value to Match Against Run Profit Rec Build at Summarization level = 4 Create Profit Recognition Data in the F5144 and F5145 Tables Run Create Journal Entries and Use RPO AAIs to Determine Journal Entry Accounts

38 Overview of Functionality Contract Billing

39 Rev Rec for Contract / Service Billing Overview of Functionality New features in JDE Contract & Service Billing Systems for Revenue Recognition Accurately recognize revenue based on performance obligations, not invoicing Place selected invoices into a Revenue Recognition process Separate from Job Cost Rev Rec process Performance liability adjustment functionality availability

40 Rev Rec for Contract / Service Billing Overview of Functionality Configure which invoices will go through the Revenue Recognition Process A/R Invoices Sales Order Invoices Contract Billing Invoices Services Billing invoices Performance Liability Accounting entries at invoice creation Recognize Revenue separate from invoicing with appropriate G/L entries

41 PA13 PA14 Contract & Service Billing: Setup

42 Slide 41 PA13 Look into new rev rec functions versus old rev rec functions Palmisano, Anthony, 8/11/2017 PA14 look at implementation guide and see if there is any comparison and grab some bullets Palmisano, Anthony, 8/11/2017

43 Contract & Service Billing: Setup Performance Liability Accounting at Recognition 1st Create Invoice Triggered into Revenue Recognition Revenue Performance Liability $ A/R Trade $ nd Recognize Revenue of Invoice Revenue $ Performance Liability $ $ A/R Trade $200.00

44 Contract & Service Billing: Setup New AAI Setup Typical RP AAI Setup AAI for the PLA (Performance Liability Account) AAI for the PLA Adjustment Account

45 Contract and Service Billing: Setup Billing Constants Setup Set to: Invoice Only Invoice/Revenue without Reconciliation Invoice/Revenue with Reconciliation Not set to: Revenue Only If Billing Constants set to: Invoice/Revenue without Reconciliation Invoice/Revenue with Reconciliation Then: Eligibility Override field in Contract Bill Details set to 1: Invoice Only Billing constants overridden when invoicing which allows Revenue Recognition processing

46 Contract and Service Billing: Setup Company Constants Setup Company Constants Turn the feature on or off by company

47 Contract Billing: Setup Trigger Hierarchy Setup Trigger Setup Invoice Trigger Hierarchy Hierarchy determined by company and by system Validation based on chronology of hierarchy After chronology then blanks based on which is listed first

48 Contract and Service Billing: Setup Trigger Date Setup Trigger Setup Invoice Trigger Date Calculation From Date: Specify the date that the system uses to calculate the eligible for recognition date. Values are Invoice or GL Date Period Comparison Date: Specify the date that the system compares with the eligible for recognition date to determine if the dates are in the same period Values are Invoice or GL Date

49 Contract Billing: Setup Trigger Setup Trigger Setup Configuration Entry of the specific records for each specific attribute in the hierarchy Revenue Recognition Inclusion - must check to include the invoice in the revenue recognition process Category Codes 52/01-52/05 Contract Billing 00/11 Service Billing Same Period Inclusion

50 Contract & Services Billing: Setup AAI Setup Typical RP AAI Setup AAI for the PLA (Performance Liability Account) Typical RO AAI Setup AAI for the PLA Adjustment Account

51 Contract and Services Billing: Examples

52 Contract and Services Billing: Examples Example #1: Contract Billing Journal Generation on Lump Sump invoice When Revenue Recognition triggers set off a PLA (Performance Liability) Journal Report created

53 Contract and Services Billing: Examples Example #1: Contract Billing Triggered because Contract Number was set up as trigger

54 Contract and Services Billing: Examples Example #1: Contract Billing A/R Batch posted

55 Contract and Services Billing: Examples Example #1: Contract Billing Revenue Partially Recognized through application and Batch posted Opens same batch the Invoice started in Moves Revenue from Performance Liability Contract Billings

56 Revenue Recognition Audit

57 Revenue Recognition Audit Revenue Recognition Invoice Audit Review audit records from the Revenue Recognition Invoice Audit table (F03B118) and the Customer Ledger table (F03B11)

58 Revenue Recognition Audit Revenue Recognition G/L Audit Review audit records from the Revenue Recognition Information Audit table (F03B119) and the Account Ledger table (F0911)

59 Contract & Services Billing: Summary

60 Contract & Services Billing: Summary AAIs for Performance Liability accounts to be set up Triggers for invoices determine if an invoice created module is sent to Revenue Recognition program Triggers compare GL dates and invoice dates to determine revenue recognition qualification New Revenue Recognition program allows fully or partial recognition of revenue Only invoices created in A/R module can be manually moved to Revenue Recognition program Audit programs allow detailed information regarding revenue transactions

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63 Q&A Q U E S T I O N S A N S W E R S Prepared by: Craig Davied Director of JDE Practice Grant Thornton craig.davied@us.gt.com /