How to Leverage Your Upgrade to R12.1 with Robust Revenue Recognition Automation

Leeyo Software, Inc.

Presented by Patrick Glenn, Leeyo Software Confidential 1

A GENDA

    Revenue recognition overview Addressing the challenges What’s needed Opportunities with R12.1

Leeyo Software, Inc.

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R EVENUE R ECOGNITION

What It Is: Principle of accrual accounting that determines the period in which revenue is recognized

   Revenue recognition is an earning process There are rules and regulations on how and when you can recognize revenue Under GAAP, there are four basic criteria: o Evidence of an arrangement exists (governing contract & PO) o Delivery has occurred (transfer title and risk of loss) o Fee is fixed or determinable (normal payment terms) o Collection is probable (customer has ability to pay) Leeyo Software, Inc.

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R EVENUE R ECOGNITION

  Continuing revenue projects o Modifying Multiple Element Arrangements (to include Best Estimate Selling Price) & Exclusion of Tangible Products from Software revenue Recognition Guidance – Effective 2009 o FASB/IASB Joint Projects – Draft format, expect to be finalized end of this year or beginning of next year Accounting terminology you may hear – FASB and IFRS guidelines, evidence of an arrangement, delivery, fixed fees, collection, software and non-software rules, multiple element arrangements, fair value (VSOE, BESP, TPE), relative selling price, revenue allocation, linked arrangements, acceptance, release events, contingencies, future upgrades, significant discounts, extended terms, software is essential to functionality, deferred revenue release, and so on….

In other words – it’s HIGHLY TECHNICAL

Leeyo Software, Inc.

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W HY IT IS I MPORTANT

     Most critical financial statement account Most complex financial statement account # 1 reason for public company restatements # 1 account that is closed manually (i.e. not in ERP) It’s a key component of their SOX certification: Leeyo Software, Inc.

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W HAT O PTIONS E XIST

C RAYOLA C RAYONS E TCH A S KETCH A PPLE E NHANCED II E

Leeyo Software, Inc.

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M ICROSOFT E XCEL

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T HE N EXT G ENERATION T OOL

        Fits to existing IT infrastructure Minimizes IT and maintenance requirements Is flexible, scalable, and has a low total cost of ownership Implements in a short time Improved internal controls on revenue System-based data repository Systematically integrates revenue best practices Globalizes and standardizes of revenue processes Leeyo Software, Inc.

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T HE N EXT G ENERATION T OOL

        Eliminates time-consuming and error-prone manual systems Accelerates period-end close and financial reporting cycles Automates all key revenue recognition requirements Handles the most complex revenue recognition issues Simplifies revenue and COGS management Enables real-time revenue monitoring Accurately forecasts revenue Stays current and in compliance with the latest revenue guidance Leeyo Software, Inc.

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H ERE ’ S W HAT I T L OOKS L IKE

User-defined Revenue Contingencies

Contingencies Applied FV Assignment & Allocations

Fair Value Analysis Auto Accounting Rules

Revenue Automation Engine Events

• • • •

Delivery Acceptance Cash Receipts Time-bound

Amortization Methods Quoting Booking Shipping Billing Leeyo Software, Inc.

Quote-to-Cash Process

Confidential Collection Revenue & COGS Waterfall Schedules Deferred Revenue & DCOGS 9

E NSURING S UCCESS

 Understand the business requirements o Articulate unique requirements clearly – avoid “one size fits all” o Set clear expectations and coordinate closely  IT and business planning with all stakeholders o Revenue-speak is different than IT-speak – need a revenue ‘champion’ o 100% automation is not reality on day 1 o Internal project teams and management Leeyo Software, Inc.

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E NSURING S UCCESS

 Data integrity and flow o Migrating from manual systems can be challenging o Historical data may not be readily available    Business process re-engineering People Scalability o Business growth o Path to future upgrades/enhancements Processes Training o New tool requires practice o Combined support from IT and revenue recognition experts Systems Leeyo Software, Inc.

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O PPORTUNITY – R12 U PGRADE

 Technical stack software upgrade o No changes to chart of accounts (COA) or organizational structure o Limited configuration changes o Minimal RICE components

Revenue automation will be driven by business user

Leeyo Software, Inc.

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O PPORTUNITY – R12 U PGRADE

 Re-Implementation o Changes to chart of accounts (COA) and organizational structure o Planned business process re-engineering o Large number of RICE components o Introducing new modules

Revenue automation is usually easy to justify

    Dollars may be available due to larger overall project Process improvements lessen automation customization People and project resources are available and focused New R12 module features can be leveraged Leeyo Software, Inc.

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E NHANCING R12 WITH R EV P RO

Leeyo’s RevPro is a complete suite of software that automates and manages every process in the revenue cycle – seamlessly integrating with the quote-to-cash processes of any ERP system.

Features:  Upload fair values (VSOE, TPE, ESP)  Identify arrangements and link transactions  Allocate revenue and post carve-outs to A/R or G/L Features:  Define release events to auto-release revenue from deferred   Manage contingencies Revenue waterfall with real-time forecast Features:  Real-time revenue analytics with drill-down capabilities  Pre-built adapters for OBIEE, SAP BW, BOBJ, Cognos Leeyo Software, Inc.

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O RACLE R12 I NTEGRATION

Oracle ERP

• Inbound sources

Standard Adapters

• Sales orders, service contracts,

invoices, credit memos, RMA orders, master data (item, customer) RevPro Staging Area

• Adapter extracts data to RevPro

staging per defined schedule RevPro data Collection

• Data gets collected to RevPro system RevPro Modules RevPro Archive • Revenue calculations

and output

• Processed data

gets archived

T YPICAL I MPLEMENTATION

        Proof of concept (optional)

Business requirements document (BRD)

Design and configuration Training and conference room pilot (CRP) User acceptance testing (UAT) GoLive

Post GoLive support, e.g. quarter-end close

Stabilization and enhancements Leeyo Software, Inc.

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W HERE W E F IND S UCCESS

 Customer profiles • • • • • Public or pre-IPO company – $50M to +$20B revenue Existing manual processes or custom solutions for revenue calculation U.S. GAAP reporting required or planned Concerned about upcoming accounting guidance changes Desire to improve IT controls on revenue  Market – high technology and expanding • • • • Software Networking equipment Consumer equipment SaaS Leeyo Software, Inc.

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W RAP UP

  Q&A Contacts o Patrick Glenn – Vice President, Business Development • [email protected]

• (408) 515-8959 Leeyo Software, Inc.

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