Earlier this week, Erik Charles, Xactly Vice President of Product Marketing, led the second webinar in a two-part series on the new Revenue Recognition Standard. Conducted together with The CFO Alliance, the webinar reviewed the impact of the new standard on commission accounting.
The following attendee poll was taken during the webinar:
Where are you in your preparations for ASC 606 (IFRS 15)?
The answers were notable:
- 56 percent – still determining our approach
- 36 percent – waiting to see what others will do
In fact, just eight percent of the attendees responded that they have chosen a model and a system.
This is significant given that the deadline in the U.S. for public companies is this December 15. Private companies in the U.S. follow a year later, and international companies operating under the IASB have until January 1, 2018.
Erik shared a few real-world examples of how the way businesses account for commission expenses will be changed by the new requirements—and it’s not simple.
Tony sells a deal for $10K for a contract term of 5 years. Sounds straightforward. Expense $2K per year over the term. That is, until the end of the second year when Tony sells an extension product—earning an additional $5K in commissions. This further extends the life of the contract and requires that the original amortization of the commission be adjusted. Somewhere in the middle of that timeframe, you also paid another $1K in commissions to a customer success rep who managed a renewal.
Companies face an enormous amount of complexity in managing their commission accounting processes under the new standard.
Xactly Commission Expense Accounting gives organizations two options for managing this process. Relying on the Xactly commission calculation engine, reporting capabilities, and our line-item compensation data model, we can:
- Deliver the required and detailed commission data to your existing ERP or revenue management system; OR
- Manage the commission expense accounting for you in a purpose-built application
Time is running short. Contact us to learn more about Xactly CEA and how our solution can support adherence.
Additionally, to learn more about the requirements for commission expense accounting, we’ve built a number of Revenue Recognition resources that you can access on our website. Plus, if you missed either of the webinars, you can also view them on-demand here.