Keytree implements SAP Revenue Accounting & Reporting

The customer employs more than 4,500 people across Europe, North America and Asia Pacific and their technologies reach 80 percent of the global population. They have shipped more than 95 billion chips to date, with nearly five billion technology-based chips sold every quarter. As the world’s leading semiconductor IP company, it has sold over 1,400 licenses to more than 450 partners, and its complex portfolio of long running contracts has frequent changes and revisions.

Large multi-national organisations, for which the revenue recognition rules had previously translated into complex accounting requirements, as per the prevailing financial reporting standard (e.g. IAS 18), have typically developed custom revenue recognition functionality in-house, or utilised classic SD revenue recognition functionality from SAP.

As of January 2018, companies reporting under IFRS had this requirement further complicated by the introduction of IFRS 15, a new five-step model to be applied to all contracts with customers. Due to the nature of how this Keytree customer operates, IFRS 15 will have a considerable impact upon how it recognises revenue for licenses, maintenance contracts and royalty management.

Preparing to meet a new standard

Initially, the customer needed to ensure they met IAS 18 requirements, so the business created a bespoke revenue accounting and recognition tool within SAP. However, to be compliant with IFRS 15 – it needed to decide whether it should continue to develop its in-house solution or move to the new SAP standard solution so called on Keytree to manage the discovery phase to assess the options available and what was involved in meeting the new standard. The customer tasked Keytree with the deployment of SAP Revenue Accounting and Reporting (SAP RAR) as the benefits of the new solution outweighed any alternative option.

Before the project started, and with the support of Keytree, the customer reviewed financial processes to identify its vision and objectives for the project, which was to achieve statutory compliance in the most efficient and automated way. The target solution needed to be compliant with IFRS 15, simplify internal processes through automation and be scalable to support growth targets through acquisition, and increasing growth while improving transparency and reporting.

Keytree worked closely with its customer to understand its order to cash business processes, complex revenue contracts and billing solution to enable the implementation of SAP RAR. Additional development work was delivered by Keytree to capacitate parallel running alongside the existing bespoke solution before the January 2018 deadline to ensure SAP RAR met specific requirements for the customer. The old and new solutions also needed to operate in parallel with each other, as for a predetermined period, businesses have to report in both standards. As the customer had a bespoke solution in place, Keytree had to be mindful on how the new solution was integrated with the old. It needed not to impact the old revenue postings – as the customer was still required to provide information in this way.

Benefits

SAP Revenue Accounting and Reporting provides advanced standardised revenue recognition capabilities, ensuring IFRS 15 compliance. Therefore, the customer no longer needs to rely on developing new functionality themselves in its bespoke solution. SAP RAR can post multi GAAP (IFRS and US GAAP) revenue adjustments via either a multi-ledger or account-based approach in multiple reporting currencies.

The new solution also reduces the amount of manual effort in revenue reporting as previously there was a range of manual actions to be completed. As it sits on existing infrastructure – there are no additional licence costs. SAP RAR provides regular upgrades, and if anything varies with the regulations, the customer will also benefit from updates or functionality changes SAP makes to the solution as and when they are delivered (as per the SAP roadmap).