Modern Revenue Recognition (ASC 606) with FinancialForce
In 5 months time, CLD Partners implemented FinancialForce’s Revenue Management App at RCI, a division of Wyndham Destinations. RCI is the world’s largest holiday timeshare network. RCI had to modernize their revenue recognition process. They also needed to comply with new regulations, specifically ASC 606 compliance for revenue recognition.
What is ASC 606
In lay terms, ASC 606 requires companies to recognize revenue when its earned regardless of when it’s billed. This means, even if the customer pays for everything up front, all of the revenue could not be recognized at that time. Additionally, it introduced clarifications on how companies could recognize revenue when items were sold as a bundle. Clarification was added to further define customer contracts (or “revenue contracts”), performance obligations and how revenue is allocated.
The Problem
RCI’s primary revenue recognition use cases centered around variable considerations and bundling. For RCI, seasonal changes and time left to redeem offers affected their revenue recognition rules (hence the variable considerations). And let’s use an example to explain bundling: a week of timeshare is sold together with a hotel voucher, therefore, making a bundle.
As we know, seasonal changes inevitably drive usage that creates peak seasons and off-seasons. Also, usage surges occur when less time remains to use a timeshare in a given period. RCI captured the seasonal and redemption data neatly in a histogram. With these facts and requirements, CLD designed a complete solution for RCI.
The Modern Revenue Recognition (ASC 606) Solution
CLD developed a way to store the RCI’s redemption histogram (month by month) for each product in Salesforce. The histogram indicated how much revenue RCI could recognize in a given month and also gave them the ability to summarize this data for each month. Then each month, this data was sent to the FF Revenue Recognition engine. Now RCI easily recognizes revenue regardless of when it’s earned.
“We gave CLD Partners an aggressive deadline to hit for our organization in implementing FinancialForce to support new revenue recognition under ASC 606. Their team delivered beyond our expectations, quickly overcoming complex business processes and implementing FinancialForce on time and under budget.”
— Terry Motsenbocker, Senior VP, North America Finance, RCI, LLC – A Wyndham Worldwide Company
ASC 606 for Revenue Recognition
Read what FinancialForce has to say about ASC 606 as well. Check out their downloadable guide for CFOs!
ASC stands for Accounting Standard Codification. Its maintained by the Financial Accounting Standards Board (FASB). ASC is the source of the United States Generally Accepted Accounting Principles (GAAP). Read more here on the FASB website. ASC 606 was developed jointly by FASB and the International Accounting Standards Board (IASB). Because of this, there is a corresponding international standard referred to as IFRS 15.
