Tech Mahindra IFRS 15 Introduction & Offering · PDF filemodules of Core HR , SSHR , OTL and...
Transcript of Tech Mahindra IFRS 15 Introduction & Offering · PDF filemodules of Core HR , SSHR , OTL and...
1Copyright © 2015 Tech Mahindra. All rights reserved.
IFRS – 15 Introduction & Offering
Tech Mahindra
2Copyright © 2015 Tech Mahindra. All rights reserved.
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
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When to recognize revenue?
• 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
IFRS15 understanding
• IFRS-15 is issued by the International Accounting Standards
Board and will supersede all revenue recognition standards in
previous IFRS and US GAAP
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What Impact for Telco?
• 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.
Most impacted industries are telecom, software development, real
estate and other industries with long-term contracts with bundled
contracts of “product + service”
IFRS15 understanding
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•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?
IFRS15 understanding
Significant impact on Telco’s
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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
IFRS15 understanding
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Revenue Recognition process in IFRS 15
5 Step Model of Revenue Recognition in IFRS 15
The requirements of IFRS 15 apply to each contract thathas 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 therelative stand-alone selling prices of each distinct good or servicepromised in the contract.
Revenue recognition based on performance obligation of transfer of promised good orservices to the customer.
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Contract Type:
Subsidised Handset,
Mobile Service; Initiation
Fees, plus associated on-
going deliverables and
charges
Product Component
Performance Obligation Component
Activation Fee:
Initiation £13
Regulatory Fee:
Government
Regulatory
Recovery Fee
(GRRF) £3
Equipment:
Handset:
Apple iPhone 5s
- Silver- 64 GB
Mobile Service:
24 month
contract £70 per
month
Regulatory Fee:
Emergency
Service £1.50
A Contract Scenario Modelled
IMMEDIATE
DISTINCT
OBLIGATION
IMMEDIATE
NON-
DISTINCT
OBLIGATION
ONGOING
DISTINCT
OBLIGATION
ONGOING
NON-
DISTINCT
OBLIGATIONS
Business Event:
Contract Signed for
Bundle, Tariff, Product, Plan etc.
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Business Event
A new customer goes into a shop and signs a contract as follows
A Contract Scenario Modelled
Lifecycle Contract Summary
Inception (at the start)
24 month term at £70 per month, (sold separately at 10% less)
A subsidised handset for £150 (sold separately at £700)
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)
Customer adds an enhanced voice mail service £20 per month
After 13 months(termination)
The customer early terminates the contract
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Middleware
Data Warehouse
Billing
Consolidation,
Mapping &
Summarisation
Automatic &
Manual
Processes
Billing Data
Accounts Receivable
Collections Financial Data
Costs
Contract Data
IFRS Summary Architecture
Data Preparation
Out-bound
TechM
L
T
E
Journal
Summary
Reporting
extracts to DW
TechM + Recognition Engine
ARRE Processes
Allocation
Calculatio
ns
S & T
V
E
Data
Error
IN
Fixed
OUT
Data
Storage
Rules
Finance
Events
Accountin
g Events
Input
API
Contr
act
Hopp
erContr
act
Produ
ct Part
Hopp
erProfile
Maps
Produ
cts
Produ
ct
Prices
Produ
ct
Bundl
es
Output
API
Reporting
Data
Data Preparation inbound Layer
TechM
Client
Finance
Environment
General
Ledger
Management
Reporting
Operational
Reporting and
Analytics
Client
Source
Systems
Billing
POS
CRM
Inventory
Costs
Data
Warehouse
Other
Business As Usual Current General Ledger Interfaces
STEP 1
Identify the Contracts with
Customers
STEP 2
Identify the Separate
Performance Obligations
STEP 3
Determine the
Transaction
Price
STEP 4
Allocate the Transaction Price to
the Performance Obligations
STEP 5
Recognise the allocated revenue when the performance
obligation is satisfied
Deployment as a Delta Adjustment Engine for faster
compliance with minimal interruption to Business As Usual
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Typical Architecture for IFRS 15 Compliance – Tech M Offerings
Offering 4
– BI
Offering 2 – Product
Evaluation &
Implementation
Offering 3 –
Data
Preparation
Offering 1 – Consulting overall
Solution
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IFRS Adoption Journey
• Business Consulting by Accounting and Auditing Experts
Step-1
• IT Consulting, Implementation Upgrade, Migration and Support
Step-2 • Domain Consulting
• Change Management
• Corporate Communication Management
Step-3
Partners
(Big 4) TechM
TechM EBS-
Oracle/ Microgen
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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
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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
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IFRS Engine Competitor overview
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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)
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TechM IFRS Capability & Experience Highlights
BMI Bank: Implementation of
Oracle e-Business Suite
R12.1.3 for Oracle Financial
and Financial Reporting in line
with IFRS Standards
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
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,
KPN: Currently Implementing
IFRS 15 Revenue
Dubai Holding: Implementation
of Oracle e-Business Suite
R12.1.3 for Oracle Financial with
IFRS Reporting Compliance
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),
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Case Studies - KPN
Our IFRS Experience
CUSTOMER OVERVIEW: Largest Telecom Operator in Netherlands
Business scenario
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
Our solution
• 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.
Value delivered
• 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.
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Case Studies – BMI Bank
Our IFRS Experience
CUSTOMER OVERVIEW: A Premier Bank in Middle East
Business scenario
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
Our solution
• 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
Value delivered
• 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
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Case Studies – Petroplus
Our IFRS Experience
CUSTOMER OVERVIEW: A refiner and wholesaler of petroleum products in Europe
Business scenario
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 It is able to comply with
local GAAP reporting
requirements
o 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
Our solution
• 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
Value delivered
• 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
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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
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Business Consulting by
Accounting and Auditing
Inbound Data Preparation and
Integration
IFRS Engine Implementation
and Configuration
Outbound Data Integration to
ERP and BI
BI Reporting for Reconciliation and Reporting
TechM
Tech M – IFRS
Engine (Oracle/
Microgen)
TechM
TechM
Consulting
Companies with
auditing experts
IFRS Implementation Journey
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Delivery Approach
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
Achieving excellence through reusable components
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Implementation Readiness
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
Building up team to support multiple implementation and opportunities
30Copyright © 2015 Tech Mahindra. All rights reserved.
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