General
We have contracts combined every month which create sales in SAP, going forward does the contract combination template have to be approved by the CFM supervisor every month before the sale can be booked?
The contract combination template does NOT need to be approved by the CFM supervisor. As a best practice we are recommending to have this documented at the time of the booking to ensure the appropriate review has been completed and that the accounting is accurate at the time of booking.
When STARTUP SECTION should be complete?
Complete during the quarter that the contract was signed, and total contract backlog is greater than or equal to $5M (including MSA Flag Sales).
When does the GAAP contract term need to be assessed?
It needs to be assessed at contract inception and re-assessed at material contract modification. Determining the materiality of a modification is discussed within Policy 200 – Accounting for Customer Contracts (Policy 200)
When PPR should not be reported?
POC/POW SEGMENTS: PPR will be captured automatically by the system.
PRE-LBA ARRANGEMENTS OR PRE-CONTRACTED WORK: PPR reporting only applies to work that MEETS the contracted criteria. PPR reporting is NOT required for the revenue true-up recorded at the point when the work becomes contracted.
What can be done in MME if significant charges hit your contract after the CAL approval was provided?
If the approval was provided early in the third month and then you have significant charges hitting the contract before or on Day +1 AFTER Contract Accenture Leader's Approval (Career Level 1-5) was already provided in MME, you can select to “unapprove” the forecast in MME, make the updates needed and ask your Contract Accenture Leader (Career Level 1-5) for re-approval.
Does every single contract we signed during a quarter have to be compared for combination against all the open contracts?
Yes, all contracts should be considered for contract combination analysis regardless of size. The documentation of the review is required for all that contracts >$500K, regardless of whether or not it should be combined. The term extension, SOW, change order, amendment, contract, etc. is at times used interchangeably. All of these contracting mechanisms should be reviewed for contract combination – it is just sometimes more obvious with a contract extension that it should be combined.
When CONTRACT MODIFICATION SECTION should be complete?
The contract is expecting to recognize $10M or more of revenue (excluding MSA Flag Sales) in the current fiscal year (i.e., contract is subject to IC Execution controls and has a contract modification of any value).
The contract is modified and reached total contracted backlog ≥ $5M (excluding MSA Flag Sales) for the first time in the current quarter (backlog could be in a single or multiple fiscal years).
The contract has total contracted backlog ≥ $5M (excluding MSA Flag Sales) (backlog could be in a single or multiple fiscal years) in the current quarter and contract modification creates a change in the accounting treatment including, but not limited to, changes to any of the accounting conclusions.
Which accounting segments require a calculation utilizing the GCT Tool?
A GCT calculation is required for a recurring services accounting segment if the contract backlog is $10M or more. (Note – If the contract is less than $10M, a recurring services accounting segment GCT is the termination notice period.)
A GCT calculation is NOT required for any accounting segments that are NOT recurring services, such as deliverables-based consulting accounting segments. For them, the GAAP contract term are always equals the stated contract term. An accounting segment that is NOT a recurring service may have termination fees allocated to it and may also have a termination notice period per the contract; however, the GCT should always be equal to the stated contract term.
When PPR is required?
• Contracted Backlog at Inception/Modification less than $25M USD has constrained variable fees.
• Contract modification that results in a contract to date true-up/true-down for contracts with contracted backlog greater than or equal to $25M USD.
• PC Revenue adjustments above +/- 2.5M USD – PPR should be assessed and reported in the PC revenue journal entry template.
What is needed if the forecast is not approved by the CAL before or on Day +1 in MME?
If Contract Accenture Leader’s approval of final EACs is NOT provided in the MME tool by Day +1 of the 3rd month of the quarter, there is a need to obtain an offline approval of the forecast by Day+2.
I have a PoC deal over the EUC Thresholds. It is time & materials (calculated by MME), no expenses, no direct costs calculations offline, no PC adj this month. Is this scenario required EUC Testing?
No. If there is no Excel spreadsheet where data would be calculated outside of standard closed architecture tools such as MME, there is nothing to be EUC tested. You just need to complete the EUC section of the CDL IC Checklist if the contract is in scope of IC Execution threshold ($10M/FY) and select that you use only MME and no other tool.
When CLOSE-OUT SECTION should be complete?
Complete during the quarter the contract has unnaturally terminated, CFM issues the final invoice and when contract is over the IC threshold of $10M/FY (excluding MSA Flag Sales).
If a contract does not recognize $10M in the current fiscal year in which the contract has been unnaturally terminated, but it was over the IC threshold in any of the prior fiscal years, the closeout controls need to be documented in the quarter when it was unnaturally terminated.
Do I need to get the GCT tool approved by anyone?
The GCT approval is documented as part of MME Approval from the Contract Accenture Leader via the Approval Certifications
Name at least 2 scenario which would typically require PPR Reporting
Segments with monthly estimated variable fees (e.g., T&M, # of transactions, SLA Holdback)
Segments where constrained revenues become unconstrained
Contract Modifications or EAC changes that include a change in fees relating to work performed/revenue recognized in a prior quarter/year
When an EAC Variance Re-Approval is required for Non-POC/POW?
Non-POC/POW (As Earned)QTD REVENUE variance* is ≥ $100K and < $250K due by Day+2 of the following quarter.
Non-POC/POW (As Earned) QTD REVENUE variance* is ≥ $250K due by Day +4 of current quarter.
My POC segment (PoC revenue = $17M in current fiscal year) is over EUC threshold, but using MME therefore no need to do EUC. However, my As Earned portion that does not meet the threshold for EUC (As Earned revenue = $9M/current fiscal year) reports PPR adjustments. Should we still need to perform EUC on the As Earned portion?
EUC testing is required for those offline calculations that relate to the revenue recognition segment that is over the EUC thresholds (POC in this example). PPR adjustments related to your As Earned segment does not need to be EUC tested as the As Earned segment is NOT over the As Earned EUC Thresholds. You need to complete the EUC section (9b. EUC Tool) of the CDL IC Checklist and select that you use only MME and no other tool (meaning on the PoC section that is over the EUC threshold).
WHAT needs to be documented for IC for Multiple Contract Structures?
Multiple SAP contract numbers approved to be accounted for a single arrangement need to assess the IC thresholds per the aggregated level and complete the internal controls in the CDL IC Checklist for multiple contracts at the combined level.
When might an accounting segment have a declining GCT term and what does that mean?
A declining GCT term is common for recurring services accounting segments when the client has a non-cancellable period or termination fees exceed 10% of billings for a period of time.
Segments with a declining GCT term require an update to SAP every quarter to align with the GCT tool. i. Ex. #1 – Client cannot terminate for 12 months and has a 3-month notice period.
PPR Reporting might require offline tracking of the calculation of PPR?
Offline tracker will be subject to IC EUC threshold for As-Earned
PPR is part of a new control documented in the ALCO and included in the MME approval certification popup required over the approval of the forecast.
Brand-new Contract Has Been Signed, New SAP Contract Set Up in SAP and MME is Not Ready Yet. How this case should be documented for IC?
Complete the standard Contract Accenture Leader EAC&EUC Approval Form and have it approved by Day+2 of the quarter end at the latest.
If the contract is also in the Execution phase of the checklist ($10M contracted revenue per FY), ALCO document must be sent to Contract Accenture Leader (Career Level 1-5) by Day+3.
Review of actuals is NOT required for the month in which a contract is in MME for the first time. The review of actuals is required starting in the month the contract is active in MME for the entire month period.
If the contract is over the EUC threshold ($16M/FY per As Earned/POC/POW revenue recognition method separately) and financials related to the new signed contract are booked based on the standard CTA/DATA Tool/MMP without any changes made to the financials, there is no need to document the EUC Logic Inspection Log.
My contract is in scope of EUC Threshold ($16M/FY). Do I need to document the EUC Logic Inspection Log for accruals?
Accruals do not need to be EUC tested unless the accruals are above $25M (assessed per a journal entry).
Name 3 scenarios that EUC needs to be prepared and approved
What does “Does the accounting segment have termination for convenience protection in excess of fees for our work completed to date?” mean?
It may be the case, particularly for capacity service or staff augmentation accounting segments, that termination protection is limited to payment for work performed to date but not yet billed. That is, there are no other termination fees or penalties incurred by the customer in the event of termination for convenience except to pay for work performed to date. If this is the case, the response to this question should be “NO”. If there are termination fees, the response to this question should be “YES”.
Name 3 Most commons PPR Ineffective Controls.
- Not reporting PPR when constrained revenue of previous quarters become unconstrained in current quarter;
- Missing billable out of pocket expense fee true-up/down pertaining to previous quarters to report as PPR.
- PPR calculations were not EUC tested or not all PPR adjustments for 3 months of the quarter were EUC tested.
- Incorrect amounts of PPR adjustments entered in MME or not reported in MME at all.
Contract processed a negative EAC change in January 2022 with As Earned Cumulative CCI variance to ODE of -$3M and it was approved at Market Unit Monthly Call. We have an additional negative EAC change of -$0.8M that will not be processed but deferred. Do I need to seek Market Unit CFO's approval for the deferral?
No, Contract Accenture Leader's (CL 1-5) approval for the deferral will be sufficient in this case as with the additional negative EAC change of -$0.8M the contract has Cumulative Full Contract Life CCI variance to ODE of -$3.8M which remains within the same $ million tier of -$3M that was already approved at the Market Unit Monthly Call in January 2022. Market Unit CFO's approval for the deferral would be required only if the additional negative EAC change caused that the Cumulative Full Life negative EAC CCI$ change to ODE reached the next $ million tier (i.e., -$4M tier or above).