Infosys’ blog on industry solutions, trends, business process transformation and global implementation in Oracle.

« Is the CFO disturbed by the dual turbulence of Cloud and Compliance at the same time - Part I | Main | Is the CFO disturbed by the dual turbulence of Cloud and Compliance at the same time - Part III »

Is the CFO disturbed by the dual turbulence of Cloud and Compliance at the same time - Part II

 

While the CFO Worries on Cloud and Compliance is very genuine, at Infosys we believe the solutions laid out below will help him stop worrying and act as a secured way to move to cloud while meeting his compliance needs.

The Cloud Journey

While the cloud is available in multiple options the most ideal option for the CFO is to use an iterative approach in building his Cloud deployment options. One of the key advantage of the Journey in cloud is the 'Pay as you go model'.

Here are some very classic example how organizations are adopting an iterative approach to a cloud model.

Step 1 : Fusion Accounting Hub

Step 2: Finance & Procurement

Step 3: Planning and Budgeting Cloud

Step 4 : Revenue Management and Lease Management Cloud

Step 5: Supply Chain Cloud

Coexistence on existence landscape

Coexistence has become very common in the ERP space, as part of the transformation journey to cloud. Today's world is the world of applications unlimited. While organizations have procurement running in Arriba and payment running on their core ERP systems with their on premise application. Similar is the landscape for a co-existence where one leg of the business operation is run on premise while the other is on cloud. By taking an Stepped approach, organizations also reduce the risks associated with updating an entire system. This way, they can take benefit of new key functionalities without having to face many of the disruptions that come with full-scale deployments. In the meantime, their core applications continue to be updated and supported, while the Cloud offerings are steadily improved and expanded. Depicted below is a sample co-existence model with Supply Chain solutions being on premise and procurement and finance on cloud.

Transformation does not change whether on cloud or on premise

Customers are realizing that the challenges relating to cloud ERP are not so much about technology but the traditional blocks of business change. Challenges around business adoption, integrations, and data migration remain, but cloud applications make user acceptance easier. Users accept solutions that are familiar and more aligned to their day to day experience. At the end of it Transformation challenges are pretty common across on premise and Cloud.  The ERP Cloud comes with an added flavor of System Upgrades and Enhancements, Improved System Performance and Accessibility and out of box delivery of prominent gaps as part of the future releases. Providers are investing in enhancing their offerings, increasing the functionality and availability of their services, and eliminating the risks of adoption while Legacy ERP systems lack scalability to support 21rst century compliance. ERP in the cloud is the future, and even companies that have good reason not to take the plunge yet should be checking developments and considering their longer-term plans.

 

Compliance Journey

IFRS 15

The IFRS 15 proposes the 5 step model for revenue recognition

          Contract Recognition 

          Written

          Verbal

          Implied

          Separate Performance Ob q       ligations

          Goods / Services / Others

          Distinct Performance Obligation

          Combined Performance Obligation

          Determine Transaction Price

          Amount of consideration entitled  in exchange

          Effect of Variable Pricing

          Allocate Transaction Price

          Allocate Transaction Price to Performance Obligations

          Recognize Revenue

          Recognize revenue where Performance Obligation is satisfied

Revenue Management Cloud

Revenue Management Cloud is an automated and a centralized, revenue management product that addresses ASC 606 and IFRS 15. The product provides a framework to automate the creation of customer contracts and performance obligations as per IFRS 15, their valuations and resulting accounting entries, and enables to recognize the revenue over time or at a point in time.

Contracts and Performance Obligations

             Rules based Automation

             Flexible Configurations

Revenue Allocations

             Simplified Revenue Accounting

             Compliant Allocations as per Standards

Satisfaction Schedules

             Point in time and over time

             Independent Billing

Recognition

             Liabilities Accrual and Assets recognition

             Income Statement on transfer to customer on performance obligation met

IFRS 16

 

IFRS 16 lays the principles of recognition, measurement, presentation and disclosing leases for both parties to a contract, i.e. the Lessee and the Lessor. Every company uses leasing or rentals, to utilize assets and will therefore is impacted by the new standard. The requirements removes almost all the off balance sheet accounting for leases. The new standard affects lessor's business models and offerings, based on the lessee's behavior. The standard is applicable with effect from January 2019.

  • Initial Recognition & Measurement

          Measure right of Use (ROU) and Lease liability at present value of lease payments

  • Subsequent Measurement

          Rou Asset Depreciate ROU Asset as per Capital Lease Standards IAS 16

          Accrue Liability in Interest method using a discount rate. Reduce liability by payments

  • Profit and Loss

          Front Loaded for an individual asset.

          Interest and depreciation segregated

Oracle Property Manager

Oracle Property Manager is a subset of the Oracle Real Estate Management solution. It is designed as a database for entities, with large property portfolios. It enables to manage real estate tasks, such as administration, space allocation, and lease management. Landlords as well as tenants can implement Oracle Property Manager to manage lease information and critical milestones and dates of the contract for property leases and space administration. This perspective makes Oracle Property Manager effective to address the needs of real estate management, commercial properties, retail or franchise operations, and investment real estate entities to manage their real estate portfolios efficiently.

Lease and Administration Management

             Manage critical lease agreements, and other obligations

             Apply Principals of IFRS16

Space Management

             Track data and record for floor and space

             Integrated CAD solution

Integration

             Minimize Financial and Contractual Risk

             A "single source of truth" for all lease activity

  • Real time drill to individual payment or billing items. Independent Billing

Reporting

             Flexibility in Reporting

               Compliance with IFRS.

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)

Please key in the two words you see in the box to validate your identity as an authentic user and reduce spam.

Subscribe to this blog's feed

Follow us on

Blogger Profiles