IFRS 15 Introduction & Offering

Transcription

1 Tech Mahindra IFRS 15 Introduction & Offering 1

2 Content IFRS15 understanding Revenue Recognition process A Contract Scenario Modelled IFRS Summary Architecture Product / Aptitude Partnership Offerings Our IFRS Project and experience Opportunities in hand/expected Delivery Approach 2

3 IFRS15 understanding When to recognize revenue? IFRS-15 is issued by the International Accounting Standards Board and will supersede all revenue recognition standards in previous IFRS and US GAAP Under new IFRS 15, the transaction price must be allocated to the individual performance obligations in the contract and recognized when these obligations are delivered or fulfilled 3

4 IFRS15 understanding What Impact for Telco? Most impacted industries are telecom, software development, real estate and other industries with long-term contracts with bundled contracts of product + service Significant impact on Telco s given large number of handset/service plan options they offer, the frequency with which customers modify their plans and the volume of contracts Expl : if the operator gives a handset for free with the prepayment plan, then the revenue from handset is 0. Revenue recognition does not correspond with monthly billing to customers, as there will be some deferral accounts involved. 4

5 IFRS15 understanding Significant impact on Telco s Contract modifications: what happens when customers modify their contracts with operators, for example change the amount of prepaid minutes or add new services? Time value of money and discounting: IFRS 15 strictly defines the financing component and requires accounting for such a component separately from revenue. Costs related to obtaining a customer: However, IFRS 15 requires capitalizing them and recognizing them in profit or loss in line with revenue recognition. How are telecom operators going to do that? What will be the pattern of expensing these costs in P/L? 5

6 IFRS15 understanding Significant impact on Telco s large number of handset/service plan options they offer, the frequency with which customers modify their plans and the volume of contracts Telco s need to report in IFRS-15 complaint format from Jan 2018 and therefore they need to prepare now The Customer target audience for IFRS-15 compliance discussions will be Finance IT, Finance Directors and CFO s 6

7 Revenue Recognition process in IFRS 15 5 Step Model of Revenue Recognition in IFRS 15 The requirements of IFRS 15 apply to each contract that has been agreed upon with a customer and meets specified criteria. Goods and service to be separately identifiable from other promises in the contract. The transaction price can be a fixed amount or a variable consideration i.e. estimation of consideration. On the basis of the relative stand-alone selling prices of each distinct good or service promised in the contract. Revenue recognition based on performance obligation of transfer of promised good or services to the customer. 7

8 A Contract Scenario Modelled Business Event: Contract Signed for Bundle, Tariff, Product, Plan etc. Contract Type: Subsidised Handset, Mobile Service; Initiation Fees, plus associated ongoing deliverables and charges Equipment: Handset: Apple iphone 5s - Silver- 64 GB Mobile Service: 24 month contract 70 per month Activation Fee: Initiation 13 Regulatory Fee: Government Regulatory Fee: Regulatory Emergency Recovery Fee Service 1.50 (GRRF) 3 IMMEDIATE DISTINCT OBLIGATION ONGOING DISTINCT OBLIGATION IMMEDIATE NON- DISTINCT OBLIGATION ONGOING NON- DISTINCT OBLIGATIONS Product Component Performance Obligation Component 8

9 A Contract Scenario Modelled Business Event A new customer goes into a shop and signs a contract as follows Lifecycle Contract Summary 24 month term at 70 per month, (sold separately at 10% less) A subsidised handset for 150 (sold separately at 700) Inception (at the start) A one off activation fee of 13 A government regulatory recovery fee of 3 per month Emergency services fee of 1.50 per month A commission of 20 was paid to the sales person at inception After 6 months (modification) After 13 months (termination) Customer adds an enhanced voice mail service 20 per month The customer early terminates the contract 9

10 IFRS Summary Architecture Deployment as a Delta Adjustment Engine for faster compliance with minimal interruption to Business As Usual Business As Usual Current General Ledger Interfaces Billing POS Inventory CRM Costs Data Warehouse Other Client Source Systems STEP 1 Identify the Contracts with Customers TechM Billing Data Accounts Receivable Collections Contract Data Costs Data Preparation inbound Layer STEP 2 Identify the Separate Performance Obligations Contr act Hopp Contr er act Produ ct Part Hopp er Profile Erro r IN Middleware Data Warehouse E Maps Produ cts Produ ct Prices Produ ct Bundl es Input API STEP 3 Determine the Transaction Price V Fix ed OUT S & T Billing Consolidation, Data Mapping & Summarisation Data Storage Rules Automatic & Manual Processes Allocation Calculatio ns Finance Events ARRE Processes Accountin g Events TechM + Recognition Engine STEP 4 Allocate the Transaction Price to the Performance Obligations Financial Data Reporting Data Output API TechM Journal Summary Reporting extracts to DW E T L Data Preparation Out-bound General Ledger Management Reporting Operational Reporting and Analytics Client Finance Environment STEP 5 Recognise the allocated revenue when the performance obligation is satisfied 15

11 Typical Architecture for IFRS 15 Compliance Tech M Offerings Offering 1 Consulting overall Solution Offering 4 BI Offering 3 Data Preparation Offering 2 Product Evaluation & Implementation 16

12 IFRS Adoption Journey Partners (Big 4) TechM Business Consulting by Accounting and Auditing Experts Step-2 IT Consulting, Implementation Upgrade, Migration and Support Domain Consulting Change Management Corporate Communication Management Step-1 Step-3 TechM EBS- Oracle/ Microgen 17

13 Offerings 1. Consulting on Path to IFRS-15 compliance This is discovery phase activity which will be take around 2-3 weeks to complete. Study of as-is landscape Options on path to IFRS compliance from as-is state Overall solution architecture for IFRS-15 compliance Project Plan to IFRS 15 compliance 18

14 Offerings 2. Product Evaluation & Implementation for IFRS-15 There are multiple products available in market like, Aptitude, Legerity, Sopra Steria, Oracle, SAP. We have a proven methodology to evaluate a product for relevance to specific client context based on following criteria: TCO Product track record Technology Platform wrt Clients existing IT estate Cloud vs On Prim Organize Product Demos & Proof of concept Adherence to schedule Flexibility 19

15 IFRS Engine Competitor overview 20

16 Offerings- 3. Data Preparation for IFRS offerings Platform to receive data for IFRS Engine from multiple sources like Billing, contract, customer, Commission & Product applications/systems Transform data based on business rules in the format required by IFRS engine (example aptitude) 21

17 TechM IFRS Capability & Experience Highlights BMI Bank: Implementation of Oracle e-business Suite R for Oracle Financial and Financial Reporting in line with IFRS Standards KPN: Currently Implementing IFRS 15 Revenue Dubai Holding: Implementation of Oracle e-business Suite R for Oracle Financial with IFRS Reporting Compliance CISCO : Currently Implementing IFRS 15 Revenue Salam International: Implementation of R12 which includes Financial modules of GL, AP, AR, FA and CM and HRMS modules of Core HR, SSHR, OTL and Payroll TDIC: Implementation of Oracle Financial with IFRS Reporting Compliance Copyright 2013 Tech Mahindra. All rights reserved. Petroplus: Secondary books with local currency to meet local GAAP requirements, USD as the single functional currency within the group as per IFRS requirements PT Bhadak : Implementation of Oracle E-Business Suite R12 including the Financial (AP,AR,CM,FA,GL), JDSU: Globally Rolled out Oracle and roll off all legacy / bolt-on applications - Rollout of Oracle to 21 countries at LATAM, EMEA and APAC Emirates Bank Group: Implementation of Rel. 12 of Oracle Applications: GL, FCH, FSAH, AP, AR, FA, Property Manager, 22

18 Our IFRS Experience Case Studies - KPN CUSTOMER OVERVIEW: Largest Telecom Operator in Netherlands Business scenario Our solution Value delivered Change of Company s accounting policy for revenue recognition from IAS-18 to IFRS-15 Changing to dual reporting (IAS18 & IFRS15) for 2017 Changing to IFRS15 from 2018 Implement Revenue Recognition Engine. TechM advisor for vendor selection process as MSP TechM configuring secondary ledger and secondary FAH for dual reporting capability in 2017 TechM to change primary ledger and primary FAH to move to IFRS15 Interfaces between Revenue Recognition Engine and other systems such as Billing, ERP, data warehousing etc. Change revenue recognition policy of company from IAS-18 to IFRS-15 Solution Advisor from technology perspective to adhere to Enterprise Architecture Multidimensional reporting based on IFRS15 requirements for financial statement and disclosures. 23 I Copyright 2016 Tech Mahindra. All rights reserved.

19 Our IFRS Experience Case Studies BMI Bank CUSTOMER OVERVIEW: A Premier Bank in Middle East Business scenario Our solution Value delivered Migration from US GAAP to IFRS needed Revamp of Disintegrated and old Systems Reduction in cycle-time for business responses Services on demand to the customer Need for robust back applications Intelligent Reporting system Singular Document Management system Enterprise Implementation of secondary ledger and FAH for IFRS Compliance Internet portal implementation using Oracle web-center resulting in award prestigious e-content Award Organization wide ECM (Enterprise Content Management System) implementation. Hyperion Consolidation System implementation for integrated reporting and planning/budgeting Oracle Ebiz System for Finance, HRMS and SCM modules implementation & Siebel CRM implementation T24 core banking application implementation & Integration services using SOA Single Sign On implementation Infrastructure management services (IMS) EPM implementation Financial Reporting in line with IFRS Standards Solution designed for growth and helps in business growth Multi-dimensional view of strategic goal achievement Best in breed tools used to meet specific requirements Comprehensive Document Management System Identity management for single and comprehensive authentication 24 I Copyright 2016 Tech Mahindra. All rights reserved.

20 Our IFRS Experience Case Studies Petroplus CUSTOMER OVERVIEW: A refiner and wholesaler of petroleum products in Europe Business scenario Our solution Value delivered GL accounting for each company for all transactions prospectively in USD in compliance with IFRS.. Each company accounting for all transactions on a notional or restatement basis in their domestic currencies such that o o It is able to comply with local GAAP reporting requirements It is capable of generating the required information in the required format to comply with various submissions to local authorities All companies managing their GL s using Oracle Financials Implementation of Oracle GL with Primary and secondary Ledgers to map requirements as per IFRS and Local GAAP respectively Restatement of financial statements in USD as per IFRS Standards and calculation of foreign exchange gain/loss Program Management (includes setting up of a dedicated Project Management Office) Change Management Technical architecture for hosting of single global instance Consolidated GL Set of Books for all businesses Consolidated IT Application within the group Common Group Chart of accounts Operate in single currency worldwide Secondary books with local currency to meet local GAAP requirements USD as the single functional currency within the group as per IFRS requirements comprehensive authentication 25 I Copyright 2016 Tech Mahindra. All rights reserved.

21 IFRS : Opportunities in hand/expected VIVA Kuwait Proposal Submitted as SI Partner for integration, Defense going on; Aptitude should be IFRS engine Etisalat UAE Yahsat UAE Ooredoo Oman VIVA Bahrain Telecom South Africa KPN Neatherland Copyright 2013 Tech Mahindra. All rights reserved. 26

22 IFRS Implementation Journey TechM TechM Business Consulting by Accounting and Auditing Consulting Companies with auditing experts TechM Inbound Data Preparation and Integration IFRS Engine Implementation and Configuration Outbound Data Integration to ERP and BI Tech M IFRS Engine (Oracle/ Microgen) BI Reporting for Reconciliation and Reporting Copyright 2013 Tech Mahindra. All rights reserved. 27

23 Delivery Approach Achieving excellence through reusable components Building Reusable ETL components for inbound and outbound Integration Building ETL Reusable component for Inbound and Outbound integration based on IFRS engine which help reducing time and cost of implementation Building Standard Test Scenario for Requirement and Testing Needs to consolidate standard Test Scenario which will be considered while configuring product and Testing. This considered to be most time consuming and risky part for onetime implementation. Building Reusable Templates for Reconciliation Reconciliation reports will be one of requirement which can be standardized Building Template for Standard BI Reports for Revenue Recognition Building Standard Reports template to expedite process of building Reports Copyright 2013 Tech Mahindra. All rights reserved. 28

24 Implementation Readiness Building up team to support multiple implementation and opportunities Building up Core IFRS Team Core IFRS team will comprises of Functional consultant, Technical Architect, Technical lead who would be trained through Product vendor Core IFRS team will be part of engine implementation and Testing across projects Necessary training will be departed through them to customer and internal team Core IFRS team will also help in building support team and plan for IFRS 16 implementation Building Near shoring and Offshoring Building up near shoring team which will move quickly across and support implementation Near shoring will comprise of Functional Consultant and Technical Architect Building up common offshore to have knowledge sharing and smooth implementation Copyright 2013 Tech Mahindra. All rights reserved. 29

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