New revenue recognition guidance issued by the FASB and IASB is effective in 2018 for public entities and 2019 for non-public entities.The release of new PeopleSoft Contracts functionality in support of the standard was organized into four phases.Changes to the Contracts application in Update Image 24 mark the fourth and final phase of new capabilities delivered to help customers comply with the new revenue accounting requirements.
Phase 1 was delivered in PeopleSoft Update Image 10 and created a new structure for revenue recognition on the Contract separate from the structure and amounts used for billing.New functionality to separate billing and revenue allows organizations to price and recognize revenue for Contract line items differently from prices used for billing the line item.New functionality in Phase 1 and in later phases is additive in nature allowing organizations to take advantage of new capabilities where needed without forcing change on other organizations less impacted by the new revenue accounting standard. Managing revenue separate from billing is optional at the Contract level.
Phase 2 was delivered in PeopleSoft Update Image 18 and provided users more advanced revenue pricing capabilities and in particular a more automated approach to revenue pricing for contracts that provide multiple products and services to the customer. Prior to Phase 2, users updated the new revenue amount structure for each Contract line item manually. Phase 2 introduced the concept of standalone sales price and a programmatic allocation of total Contract price across Contract line items using standalone sales price as the basis for allocation, a key requirement under the new accounting standard. Phase 2 extends use of the Enterprise Pricer tool in PeopleSoft Order Management to store standalone sales prices for revenue and then uses those standalone sales prices as a basis for revenue allocation in Contracts.
Phase 3 was delivered in PeopleSoft Update Image 22 and provided new transition analytics to support customers in their assessment of impact. As organizations prepare to transition to the new accounting standard, new analytics provide a comparison of current revenue values per Contract line item to new revenue values per line item using standalone sales prices configured in the Enterprise Pricer as the basis of allocation. In addition, contract accounting was extended from having only Project Id to also include Project Costing Business Unit and Activity Id with the goal of providing better visibility into Contract and Contract line in PeopleSoft General Ledger via the full combination of Project Chartfields.
Phase 4 was delivered in PeopleSoft Update Image 24 and introduces new terminology ‘Contract Asset’ and ‘Contract Liability’ to reflect that used in the new accounting standard.
Oracle Red Papers and other information resources are available on the PeopleSoft Information Portal as well as Transfer of Information (TOI) Videos located in Oracle University.
TOI - Separating Revenue and Billing in Contracts
TOI - Advanced Revenue Pricing in Contracts
Oracle Red Paper - Separating Revenue and Billing in Contracts
Oracle Red Paper - Advanced Revenue Pricing in Contracts
Oracle PeopleSoft ESA Solutions