How to Comply with IFRS 15 Regulations Using SAP Revenue Accounting and Reporting 1.2

  • by Santosh Kumar , Consultant, SAP Max Attention (SAP America Inc.)
  • May 22, 2017
Learn how to set up SAP Revenue Accounting and Reporting 1.2 in SAP ERP Central Component (ECC) 6.0 to comply with the new accounting standard regulation IFRS 15. The new regulation was jointly released by two leading accounting standard bodies: the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB).
Learning Objectives

Reading this article, you’ll learn:

  • How to configure SAP Revenue Accounting and Reporting 1.2 in SAP ERP Central Component (ECC) 6.0.
  • How to use the Business Rule Framework Plus (BRFplus) application to set up SAP Revenue Accounting and Reporting 1.2.
  • How to set up integration of the SAP sales and distribution (SD) component with SAP Revenue Accounting and Reporting 1.2.
Key Concept
SAP Revenue Accounting and Reporting is a free add-on product introduced to help companies that are affected by the IFRS 15 regulation. This new regulation takes effect on January 1, 2018, for public companies and from 2019 for private companies. SAP Revenue Accounting and Reporting offers Web Dynpro applications based on Business Rule Framework Plus (BRFplus) that help organizations meet IFRS 15 regulations.

The International Accounting Standards Board (IASB) is responsible for International Financial Reporting Standards (IFRS) in the following regions:

  • The European Union (EU)
  • Asia-Pacific and Japan (APJ) and Latin America (LA)

The Financial Accounting Standards Board (FASB) is responsible for US Generally Accepted Accounting Principles (US GAAP) in the US region.

Both these leading accounting standard bodies (FASB and IASB) jointly announced a new accounting standard regulation on May 28, 2014, to have convergence in accounting practices across the regions.

The new accounting standard affects all organizations that are using contracts and will change the practice of their revenue recognition process. For example, as per the new accounting standard IFRS 15, an entity can recognize the revenue when (or as) the entity satisfies a performance obligation by transferring promised goods or services to a customer and the customer obtains the control of the promised goods or services.

In new accounting standard terminology, revenue will be recognized when the performance obligation (POB) is satisfied. This can be near the time of customer invoicing or can depend on other events—for example, a goods issue or proof of delivery. In other words, an entity should not wait to recognize the revenue until the invoice reaches the customer.

Note
Currently, in SAP Revenue Accounting and Reporting 1.2, revenue can be recognized either based on contract acquisition costs, customer invoice, consumption, goods issue, or manual fulfillment. Proof of delivery is not available in standard SAP Revenue Accounting and Reporting at this moment.

I show you how to set up SAP Revenue Accounting and Reporting 1.2 in an SAP S/4HANA Finance environment or in an SAP system with at least SAP ERP Central Component (ECC) 6.0 enhancement package 5, Support Package 10. I also explain how to integrate the SAP sales and distribution (SD) component with SAP Revenue Accounting and Reporting 1.2.

The amount of recognized revenue depends on new attributes, such as multiple element arrangements (MEA), variable considerations, and allocation of transaction price. In summary, the IFRS 15 accounting standard is based on the five-step model shown in Figure 1.


Figure 1
The five-step model of the IFRS 15 accounting standard

The architecture for SAP Revenue Accounting and Reporting is shown in Figure 2.


Figure 2
The solution architecture for SAP Revenue Accounting and Reporting

Santosh Kumar

Santosh Kumar is part of the SAP Max Attention (SAP AGS) team at SAP America. He has nine years of experience in SAP system consulting. He has thorough knowledge in the integration of SD, FI-CO, FI-CA, Hybris Billing and SAP Revenue Accounting and Reporting. Santosh has worked in projects for industries such as high-tech, pharmaceuticals, telecommunications, retail (IS-R), and Oil & Gas.

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