Join experts from CBIZ & MHM, Vindicia, and SOFTRAX as we discuss how to get your business ready for the new revenue recognition guidance. Discover the implications of the revenue recognition standards, and learn about technology solutions that can enable you to manage your application of the new standards once implemented.

1. BILLING AND REVENUE RECOGNITION
CHALLENGES ON THE
SUBSCRIPTION BASED ECONOMY
THURSDAY, OCTOBER 13, 2016
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PRESENT

2. FEATURING
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2
Doug Smith
VP of Customer
Success
Bradford Hale
CPA
Jeff Halden
Solution Advisor

3. BRADFORD HALE
12/19/2016
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3
Brad is a Managing Director with CBIZ
MHM focused on building the firm’s
attest footprint through relationships
with companies facing complex
technical accounting matters and
growing the Accounting Advisory
practice. He is the firm’s national
leader in Topic 606 advisory services
and is actively working on a number of
implementation projects.
Bradford Hale
CPA

4. DOUG SMITH
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Doug Smith
VP of Customer
Success
Doug has over 20 years of experience
in technology development and
professional services in enterprise
software and telecommunications. His
primary areas of focus are
professional services practice
development and enterprise-scale
integration strategy.

5. JEFF HALDEN
12/19/2016
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5
Jeff Halden
Solution Advisor
Jeff leads Softrax’s Solution Advisory function in
the West region, advising clients on revenue
management issues related to Softrax Revenue
Manager. He was formerly both an Auditor and
Consulting partner with Ernst & Young and
Capgemini, and has held multiple leadership
positions with technology businesses in the Bay
Area.

6. WEBINAR
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On Demand: A recording of this webinar will be sent out to all attendees
within 48 hours. The presentation will be available on demand.
Please ask Questions: We encourage you to submit questions via the
“Questions” box in your GoToWebinar control panel.

7. AGENDA
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Overview of the Landscape of the Subscription
Economy
02
01
03
04
Identification of Performance
Obligations and Forms of Variable
Consideration
Implementation Challenges
Internal Control Considerations

8. 8
OVERVIEW OF THE LANDSCAPE OF THE
SUBSCRIPTION ECONOMY
01
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9. $15 / mo
x 12 mo
x 10 years
------------------
$1800 Lifetime Value
TRADE YOUR CAR TO WATCH A MOVIE?
9

10. LOVE AND HATE SUBSCRIPTION
BUSINESSES
0
1000
2000
3000
4000
5000
6000
7000
M1 M3 M5 M7 M9 M11M13M15M17M19M21M23
New subs Renewals
Constant
Marketing
Spend
Steady
Growing
Revenue
Inputs: Adding 400-600 subscribers per month, with monthly retention rate of 88%

11. 11
IDENTIFICATION OF PERFORMANCE
OBLIGATIONS AND FORMS OF VARIABLE
CONSIDERATION
02
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12. GENERAL APPLICATION CRITERIA VS
STEPS
Topic 605
• Staff Accounting Bulletin (SAB) 104
establishes the “four criteria” to
recognize revenue
• Persuasive evidence of an arrangement
• Delivery and performance
• Fixed or determinable sales price
• Collectability is reasonably assured
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1
• Identify the contract(s) with a customer.
2
• Identify the performance obligations in the
contract.
3
• Determine the transaction price.
4
• Allocate the transaction price to the
performance obligations in the contract.
5
• Recognize revenue when (or as) the
entity satisfied a performance obligation.
Topic 606
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13. Topic 605
Multiple Deliverable
Arrangements
13
Topic 606
Step 2:
Identify the performance
obligations in the contract
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14. STEP 2: IDENTIFYING PERFORMANCE
OBLIGATIONS (TOPIC 606)
• A performance obligation is a promise in a contract with a customer to
transfer to the customer:
• A good or service (or bundle of goods or services) that is distinct,
or
• A series of distinct goods or services that are substantially the
same and that have the same pattern of transfer to the customer.
14
Goods and services are generally explicit in the contract
but may be implicit
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15. STEP 2: IDENTIFYING PERFORMANCE
OBLIGATIONS
• A promised good or service is considered distinct if both of
the following conditions are met:
• Capable of being distinct
• Distinct in the context of the contract
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Promised goods and services that are not distinct are bundled with other
promised goods or services until a bundle that is distinct is identified.
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16. STEP 2: IDENTIFYING PERFORMANCE
OBLIGATIONS
• When is a good or service capable of being distinct?
• The customer can benefit from the good or service on its own or in
conjunction with other readily available resources:
• Use/Consumption
• Sold (for more than scrap)
• Generate other economic benefit
16
Consideration may include if the good or service is
regularly sold separately
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17. STEP 2: IDENTIFYING PERFORMANCE
OBLIGATIONS
• When is a good or service distinct within the context of the contract?
• The promise to transfer the good or service to the customer is separately
identifiable from other promises in the contract
• A good or service may not be distinct when:
• It is an input used to produce a combined output specified by the
customer
• It significantly modifies or customizes another promise in the contract
(or vice versa)
• It is highly interdependent or interrelated with other promises in the
contract.
17
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18. PERFORMANCE OBLIGATIONS COMMON
TO THE SUBSCRIPTION INDUSTRY
B2B
• Subscription license
• Implementation services
• Maintenance
• Customer support
• System upgrades
• Renewal/Customer options
• Hardware 18
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B2C
• Subscription license
• Maintenance
• Customer support
• Renewal/Customer options

19. SOFTRAX REVENUE MANAGER
MANAGING PERFORMANCE OBLIGATIONS UNDER
ASC 606
• Separate Performance Obligations
• Automate the process of separating/creating POBs and/or ‘carving’ out
a specific POB from others
• POB creation can be completely automated via pre-defined templates or
dynamically created upon import if they consistently differ
• Allocate Contract Price to Performance Obligations
• Automate the allocation of the contract price to the POBs based on the
relative Standalone Selling Price
• ‘Parent’ item/bundle may retain or distribute all of its relative value
• Establish Revenue Recognition rules and apply to Performance
Obligations
• Automate the process of forecasting and recognizing revenue,
assigning Disclosures and GL accounts, etc.
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20. FORMS OF VARIABLE CONSIDERATION
COMMON TO THE SUBSCRIPTION
INDUSTRY
• Consideration may be variable in nature or contingent on future
events, examples include:
• Discounts
• Rebates
• Refunds
• Credits
• Incentives
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21. INTERNAL CONTROL
CONSIDERATIONS
21
03
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22. CONTROL ENVIRONMENT & RISK
ASSESSMENT
Control Environment
• Demonstrates tone at the top
• Exercises oversight
responsibility
• Establishes structure,
authority, and responsibility
• Maintains an effective internal
audit function
• Demonstrates commitment to
competence
22
Risk Assessment
• Identifies and mitigates risk
• Considers the potential for fraud
• Assesses the risk of meeting the
company’s objectives
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23. INFORMATION AND COMMUNICATION &
MONITORING
•Information &
Communication
• Gathers the appropriate information
to make judgments and satisfy
disclosure requirements
• Retains data for reliable
restatement
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• Monitoring
• Selects, develops, and
performs ongoing evaluations
of internal control
• Evaluates and communicates
deficiencies in internal control
in a timely manner
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24. CONTROL ACTIVITIES: STEP #1
• Identifying contracts that meet the criteria under Topic 606
• Reassessing arrangements not initially meeting the criteria
• Assessing management’s and the customer’s ability to perform
• Ensuring payments terms are properly considered
• Assessing the collectability criterion
• Evaluating whether to combine contracts
• Evaluating contract modifications
24
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25. CONTROL ACTIVITIES: STEP #2
• Identifying both explicit and implicit performance obligations
• Evaluating whether a promised good or service is distinct
• Evaluating whether a series of promised goods or services should be
treated as a single performance obligation
25
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26. CONTROL ACTIVITIES: STEP #3
• Estimating the transaction price, particularly any form of variable
consideration
• If valuation experts are utilized, assessing their competence and objectivity
• Evaluating whether any portion of variable consideration should be
constrained
• Determining the fair value of noncash consideration
• Identifying and measuring whether there is a significant financing
component in the contract
• Determining the accounting for consideration payable to a customer 26
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27. CONTROL ACTIVITIES: STEPS #4 AND #5
•Step #4
• Estimating standalone
selling price, including
maximizing observable
inputs
• Determining the
appropriate transaction
price allocation, including
variable consideration
and discounts
27
• Step #5
• Determining whether
performance obligations
are satisfied at a point in
time or over time
• Measuring progress
toward satisfaction of a
performance obligation
measured over time
• Recognizing revenue only
when or as control is
transferred to a customer
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28. IMPLEMENTATION CHALLENGES
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04
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30. CONTACT US
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Doug Smith Bradford Hale Jeff Halden
www.softrax.com
jhalden@softrax.com
www.cbiz.com
bhale@cbiz.com
www.vindicia.com
dsmith@vindicia.com

31. QUESTIONS
31
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?

32. CONTACT US
www.softrax.com
+1 972-715-4028
info@softrax.com
COPYRIGHT 2016 –SOFTRAX CORP, VINDICIA, & CBIZ MHM .ALL RIGHTS RESEREVED.
www.cbiz.com
bhale@cbiz.com
www.vindicia.com
dsmith@vindicia.com

33. THANK YOU
33
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