Revenue Recognition

Revenue accounting is becoming far more complex and auditors are now examining financial records in finer detail. Unfortunately, typical accounting systems do not handle complex revenue processes well because they were designed for a world in which revenue was simple. Customer relationships defined by multi-element agreements involving bundled line items, tiered pricing, complex discounts, multiple billing methods, and long-term support and maintenance agreements can generate extremely complex accounting challenges. As a result, your financial infrastructure must be robust and extremely flexible especially where revenue in concerned.

The AICPA’s Statement of Position SOP 97-2, SOP 98-9 and SOP 81-1, and the SEC’s (Staff Accounting Bulletin) SAB 101/ SAB 104/ SAB 104 all provide guidance on what elements of a contract’s revenue can be recognized at what period during a contract's lifecycle. Some types of revenue can go on the books immediately. Others must be allocated over time, occasionally involving discounts and currency fluctuations that can have implications for still other elements. When VSOE (vendor specific objective evidence) is applicable, the picture becomes even more complex. The breadth of data that must be processed and maintained with original integrity from transaction to transaction is staggering, forcing many companies to turn to expensive customizations and massive spreadsheets.

Softrax automates revenue accounting, and excels when complex issues occur across multiple business models, corporate entities, and currencies. With Softrax, accounting guidelines, including VSOE, are applied instantly and appropriately to different revenue streams, and your revenue recognition processes are inherently auditable down to the line item level. As a result, the basis for compliance with all the guidelines from the SEC, FASB, and now the Sarbanes-Oxley Act, is built into your financial infrastructure. In addition, because you have far more granular data available your audit process is simplified, and your reporting and forecasting activities are much more robust.

Solution highlights

Automate even the most complex revenue calculations Automate the application of the SOP 98-9 residual method of revenue allocation Automatically recast revenue distributions based on groups of line items Easily redistribute revenue to individual components to support third party royalty agreements and complex discounting Automatically establish a standard methodology for recognition rules

Integrate complex deferred revenue transactions with your general ledger Automatic general ledger mapping and monthly general ledger posting Automatically move revenue from deferred to recognized accounts according to business rules—no need to back it out of the general ledger and re-allocate it manually

Apply revenue recognition policies on an enterprise basis Support multiple business models with bundled revenue streams including: product, maintenance, subscription, transaction, usage, and services Automatic date schedule creation based upon product type, order type, revenue compliance rules Recognition based on dates, events, and % complete values Multi-entity support Multi-currency support per FASB 52 guidelines Support the revenue allocation process as part of the standard business flow

Simplify compliance with vendor specific objective evidence (VSOE) requirements of SOP 97-2 Maintain “VSOE price books” with appropriate pricing ratios of all components to be shipped to the customer Automatically allocate revenues within each order as specified by the VSOE pricing ratios Automatically create deferred revenue schedules for any of the components Automatically recast revenue distributions based on new VSOE values

Gain total control over deferred revenue transactions Completely automate deferred revenue accounting tasks Easily create and manage deferred revenue schedules Enable more sophisticated reporting and forecasting

Completely automate maintenance renewals Optimize maintenance renewals through the entire revenue cycle Instantly determine which customers or products are up for renewal Make the renewal process easier for your customers Easily incorporate complex pricing

Powerful reporting and forecasting functionality Gain unique insights into business performance Instantly access detailed historical and future views of both deferred and recognized revenue streams

Support compliance with Sarbanes-Oxley, SEC and FASB Provide a transactional audit trail for SOX 404 assertions Support compliance with revenue recognition rules (SOP 97-2, 98-9, VSOE, SOP 81-1, SAB 101/ SAB 104, and EITF 00-21) Identify and optimize revenue processes Improve the integrity of revenue data Better establish and enforce internal controls for revenue