With companies transitioning to NetSuite ASC 606/IFRS 15 accounting software standards, NetSuite will have to accommodate both the new and old accounting standards in the system for existing customers who are in the midst of transitioning.

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You are: NetSuite Administrator, CFO, Controller.

NetSuite’s response to the new accounting standard is the Advanced Revenue Management Module or ARM. It is the latest and most advanced revenue engine from NetSuite. The module provides customers with the flexibility of controlling their revenue practices through accurate revenue reporting. Below are some of the functionalities and benefits of ARM:

  • Automated foreign currency adjustments
  • Dynamic fair value pricing engine
  • Audit tracking on key fields
  • Contract cost amortization
  • Percentage of completion method supported on projects
  • Rule and event-based NetSuite revenue recognition (rev rec) module
  • Automated revenue forecasting

With ARM, billing and NetSuite revenue recognition (rev rec) module become two separate processes but reconcile during the month end process. As a result, NetSuite accounting software (ARM) provides the flexibility of billing customers based on the amounts agreed by the client, while simultaneously re-allocating and recognizing revenue based on the configured fair value allocations, if applicable. For prospective NetSuite users who must comply with the new standard, ARM is a highly recommended solution to support your accounting and business practices.

HOW DOES NETSUITE ASC 606/IFRS 15  ACCOUNTING SOFTWARE AFFECT NETSUITE CUSTOMERS WHO ARE ALREADY RUNNING REVENUE COMMITMENTS?

Customers currently using Revenue Commitments, the previous revenue engine from NetSuite accounting software can continue to do so provided the only allocation approach recommended by their accounting firm is the residual method. Even though ARM can support the residual method, it is preferred to use Revenue Commitments with it. If your accounting firm has suggested an allocation approach which utilizes fair value, then you will need ARM to process the revenue allocations.

While the new NetSuite ASC 606 accounting software standard may be a driving force to upgrade from Revenue Commitments to ARM, there are other factors to consider as well. Revenue Commitments is an extremely rigid revenue management engine and does not allow for dynamic adjustments. If revenue needs to be adjusted midterm, then Revenue Commitments does not have the capability to adjust revenue automatically and requires manual workarounds.

If you decide to implement ARM, a migration effort will be required to regenerate/migrate open transactions from Revenue Commitments to the ARM module. To learn more about the transition process from Revenue Commitments to ARM, contact your NetSuite customer service rep.

I AM A NETSUITE CUSTOMER CURRENTLY USING ARM, BUT MY CONFIGURATION IS NOT COMPLIANT WITH ASC 606/IFRS 15.  WHAT DO I DO?

Prior to configuring ARM with specifications that are in compliance with NetSuite ASC 606/IFRS 15, you should enlist the assistance of your accounting firm. They can establish which revenue allocation method is applicable to your business and provide numerical examples and formulas for how fair value amounts should be calculated. This information will play a large role in the configuration of ARM to be compliant with the new accounting standards.

When ARM is configured under NetSuite ASC 606/IFRS 15, all new transactions going forward will follow the new configuration. However, previous open transactions will not pick up the latest configuration, since there are active revenue arrangements and plans in the process. For these transaction records to have the latest ARM configuration, a data migration effort will be needed to migrate open revenue arrangements.

FROM A FINANCIAL MANAGEMENT REPORTING STANDPOINT, I’LL NEED TO REPORT MY FINANCIALS UNDER ASC 606/IFRS 15 AND THE PREVIOUS STANDARD.  CAN THIS BE DONE WITH NETSUITE?

To fully support the new accounting standard in NetSuite, multi-book functionality will be required. The Multi-Book module allows you to manage up to 5 separate accounting books within NetSuite. This allows you to use multi-book functionality for comparative financial management report between the previous and new accounting standards, in order to show stakeholders the differences between the two standards. This module is separate from the ARM module and will need to be purchased. To learn more about the Multi-Book module, please contact your NetSuite account manager or service provider.

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