IT projects frequently fail. Depending upon which industry you belong to , the failure rate of large projects is reported as being between 70%-80%. Because of the natural human tendency to hide bad news, the real statistic may be even higher. This is a catastrophe.

Many of the reasons have less to do with technology and more to do with failures to communicate and accept accountability, this reports Dennis McCafferty at CIO Insight in his intresting post .Some of key causes are..

1. Leaving users out of discussions regarding prototyping and application design.
2. Leaving infrastructure poorly defined and allowing IT workers to come up with their own approach to tools and programs.
3. Letting users delay projects by constantly requesting tweaks.
4. Getting wedded to a platform and refusing to ensure necessary training and support to transition to new ones.
5. Getting stuck in the weeds of a project rather than leading the team through it.
6. Allowing incomplete or poor documentation.
7. Ignoring poor data quality.
8. Falling back on jargon rather than communicating clearly with stakeholders.
9. Agreeing to unreasonable deadlines.
10. Letting interpersonal skills slip.

Check it out for Dennis McCafferty’s article at CIO Insight

REIT is a company that mainly owns, and in most cases, operates income-producing real estate such as apartments, shopping centers,offices, hotels and warehouses. Some REITs also engage in financing real estate. The shares of many REITs are traded on major stock exchanges.

With changes in the tax rates, a number of other operating businesses are evaluating the benefits of conversion to a REIT status.

As a real estate investment trust, a company is allowed to distribute 90% of its taxable income to its shareholders and is subject to lower taxes. This Post will help you to gove more insights on REIT.

REITs can be bought and sold like listed securities and generates revenue through rental payments from the properties under it.

This revenue is distributed to the unit holders either on a semi-annual or annual basis. REITs are known to some as “pass-through entities” since they pass significant amount of their profits to investors.[ref:http://sqft.asia]

A REIT is an entity that:

• Owns, leases and operates income-producing real estate
• Holds at least 75% of total assets in real estate
• Derives at least 75% of gross income from real property rents, including storage revenues, or other real property sources
• Generates service and non-property related income within Taxable REIT Subsidiaries
• Distributes annually at least 90% of qualifying taxable income in the form of dividends

REIT structure provides significant benefits to stockholders

• Substantial tax savings
• Disciplined capital allocation strategy
• New opportunities for value creation

Are REITs located only in the US?

REITs are now global: Nearly 30 countries have adopted variations of the U.S. REIT model. Today, anyone in the world can invest in REITs around the world

What are some examples of REITs?

REITs own many of the shopping malls, apartment buildings, student housing complexes, homes, medical facilities, office buildings, hotels, cell towers and timberlands that we use every day.

These sort of companies currently exploring REIT status represent new REIT property types

Tower Companies
Tower companies build permanent structures on land and rent space on them to telecom companies.

Data Centers
Data center REITs lease server space to their tenants, and they have been in the index since 2004.

Storage
Storage REITs have been around for decades.

Prisons
Prison REITs first entered the index in the 1990s.

Lodging/ Resorts
There have been dedicated hotel REITs since 1970.

Infrastructure
There currently is an Infrastructure sector in the FTSE NAREIT All REITs Index.

Billboards and Gaming
There haven’t been billboard or gaming REITs in the index in the past, but their basic business models, like those of other REITs, involve providing land and the improvements on it for lease to tenants.

Are all REITs the same?

The REIT industry has a diverse profile, which offers many benefits.

Types of REITs

REITs often are classified in one of two major categories: equity REITs or mortgage REITs.

• Equity REITs derive most of their revenue from rent.
• Mortgage REITs derive most of their revenue from interest earned on their investments in mortgages or mortgage backed securities.

A third type is Hybrid REITs – A combination of the two aforementioned REITs

REITs can be publicly registered with the SEC and have their shares listed and traded on major stock exchanges, publicly registered with the SEC but not have their shares listed or traded on major stock exchanges, or private (not registered with the SEC and not having their shares listed or traded).

Source from Internet , Ninety percent of listed REITs are Equity REITs; the remaining 10 percent are Mortgage REITs.

Qualification as REIT for U.S. Tax Purposes

In order for a company to qualify as a REIT, it must comply with certain provisions within the Internal Revenue Code.

As required by the Tax Code, a REIT must:

• Be an entity that is taxable as a corporation
• Be managed by a board of directors or trustees
• Have shares that are fully transferable
• Have a minimum of 100 shareholders
• Have no more than 50 percent of its shares held by five or fewer individuals during the last half of the taxable year
• Invest at least 75 percent of its total assets in real estate assets
• Derive at least 75 percent of its gross income from rents from real property or interest on mortgages financing real property
• Have no more than 25 percent of its assets consist of stock in taxable REIT subsidiaries
• Pay annually at least 90 percent of its taxable income in the form of shareholder dividends

Why should someone invest in REITs? What advantages can REITs potentially offer investors? [ Source Internet]

• Diversification: Equity REITs invest in many different property types in all 50 states, bringing investment diversification by property and geography to investor portfolios. Over the long term, equity REIT returns have followed a path that has been different than the path of returns for other stocks, an important source of portfolio diversification.
• Dividends: REITs must pay out at least 90 percent of their taxable income as dividends to shareholders who in turn pay income taxes on those dividends at ordinary rates.
• Liquidity: REIT is a liquid investment when it is listed as a shares or units of a listed REIT and traded like any others stock on the stock exchange. REIT able provides greater investment flexibility, with ability to react more quickly to change in market conditions, in comparison to investing in physical property.
• Performance: Over the 30 years ended March 28, 2013, publicly traded equity REITs outperformed the leading stock market indexes, including the S&P 500, Dow Jones Industrials and NASDAQ Composite.
• Transparency: REITs are governed by the respective exchange regulations and are mandated by law to submit disclosures every quarter or year. This makes REITs highly transparent investment instruments.
• Growth: Over long holding periods, equity REIT returns have tended to outpace the rate of inflation, helping investors hedge the purchasing power of their portfolios.

Who manages a REIT?

• Like other publicly traded companies, a REIT’s executive management team operates the company, deciding what properties it will own and manage.
• Management’s decisions are overseen by a board of directors that is responsible to the shareholders.

REIT Provides Significant Stockholder Benefits

Three Key Value Drivers

• Higher dividends over time supported by
• U.S. federal & state income tax savings
• Higher distributable pre-tax income
• Both U.S. & international rental (QRS) income

Facts About REIT Conversions

A number of companies have announced recently that they are exploring converting to a REIT. Why?

There are two primary reasons a company would consider converting to a REIT:

1) Business model and core competencies – REIT status is available to companies that are primarily real estate companies, the majority of whose revenues and assets come from real estate. They’re choosing to focus on their core real estate business and operate as REITs.

2) Macro-economic trends – Today’s slow-growth economic environment and the Federal Reserve’s commitment to keep interest rates low for an extended period have produced a global search for yield and strong valuations for income stocks. The requirement that REITs pay out at least 90 percent of their taxable income as dividends makes them especially desirable now as excellent income stocks.

Globalization of Real Estate Securities

Many countries have adopted a REIT-type structure:

• LPT – Listed Property Trusts (Australia)
• Dutch FBI – Fiscal Beleggings Instelling (Netherlands)
• S-REIT – Singapore Real Estate Investment Trust
• J-REIT – Japanese Real Estate Investment Trust
• SIIC – Sociétés d’investissements Immobiliers Cotées (France)
• Canadian REITs – Legislated in 1993, growing universe
• Belgium REITs – Growing universe
• Hong Kong REITs – Largest REIT IPO Completed in November 2005
• Bulgarian REITs – Newest country with REIT legislation
• Malaysian REITs – Growing universe

Honest review of challenges and advantages on Big Data.

“Big data: What’s your plan?” brings together learnings from actual analytics projects to show you how to get started. They’ve then produced 3 easy-viewing videos that:

• Explain the Big Data challenge
• Outline the human elements of implementing your Big Data plan, and
• Present the business case for such a profound data transformation

Should focus will still remain on 3 core elements: data, analytic models & tools?

Enjoy!

Under Generally Accepted Accounting Principles (GAAP), deferred revenue, sometimes called unearned revenue.

Deferred revenue is a liability that is created when monies are received by a company for goods and services not yet provided.

What is the deferred revenue?

Deferred revenue is a liability that is created when monies are received by a company for goods and services not yet provided.

Revenue will be recognized, and the deferred revenue liability eliminated, when the services are performed.

Deferred revenue stems from the accounting concept of revenue recognition, under which revenues are recognized only when the earnings process is complete. If funds are received and no goods or services have yet been provided, the process is not complete; thus revenue cannot be recognized, and a deferred revenue liability is recorded.

Specifically, the deferred revenue account is credited, and cash (or otherassets) are debited. Please take a note deferred revenue is recorded in specific industries under particular circumstances.

Deferred Revenue Example

Like many subscription businesses, A internet Hosting company offers a plan to pay upfront for whole year.

Since deferred revenue represents the value of the services that are left to be delivered at a point in time, if you purchased the annual plan, $2400 would be added to both the cash account of the balance sheet and the deferred revenue line. Every month $200.00 would be moved out of deferred revenue and reported as revenue on the income statement.

Understand why you need to defer revenue.

Why can’t you just record the revenue when you actually receive the cash payment? By doing so , this would violate the principles of accrual-based accounting.

There are 2 principles which provide the foundation for accrual accounting.

1. The first is the matching principle. Under the matching principle, revenues and expenses that correspond to each other must be recorded in the same accounting period. Using the insurance example above, you cannot recognize all the revenue in January, because there will be expenses associated with that insurance coverage incurred throughout the year. These expenses must be matched with their corresponding revenues.
2. The second is the revenue recognition principle. This principle dictates that revenues should only be recorded when they are both realized (or realizable) and earned. “Realized” revenues are those for which a claim to cash has been received, and “earned” revenues are those for which a good or service has been rendered.

The implication, then, is that you cannot simply record a revenue whenever cash is paid to your company. If, for example, a client is prepaying for a continuing service, then you cannot recognize that payment as revenue until you actually render the service. Until then, the payment represents a liability, or an obligation to the client. This makes sense to you.

Governing Rule

For revenue to be recognized (earned), SEC have SAB 101/104 sets four key conditions that must be met:

1. Persuasive evidence of an arrangement exists,
2. Delivery has occurred or services have been rendered,
3. The seller’s price to the buyer is fixed or determinable, and
4. Collectability is reasonably assured

Understanding the Deferred Revenue Accounting Process

You can create and send invoices for products or services that you will deliver in the future or over a range of time.

Invoice details:

• Bill line amount: 6000.00 USD.
• Invoicing Rule = Bill in Advance
• Invoice Date 2-DEC-12
• GL Date 2-DEC-12
• Accounting Rule:Type: Accounting, Fixed Duration
• Period : Monthly
• Number of Periods : 6

Here is accounting Posting

Finally

Keep in mind that deferred revenue generally means that cash has been received by the seller, so the remaining concern is determining when the cash is recognized as earned revenue. Within GAAP, there are multiple methods that can be used to recognize revenue. Depending upon which method is chosen, the financial statements may look drastically different even though economic reality remains the same.

Are you aware about the top three concerns for finance teams as

1. Financial closing and reporting process
2. Excessive use of spreadsheets
3. and revenue recognition.

In key finding of survey conducted by www.RevenueRecognition , it was observed

• 92% of public companies rely on manual processes to perform key revenue recognition and reporting functionality (nearly the same percentage is true for private companies).
  • 68% of all companies stated their Financials/ERP systems DO NOT automate all their revenue recognition and reporting activities.
  • 84% of companies that initially stated Financials/ERP systems DO automate revenue accounting are actually using spreadsheets for these activities.
• The finance processes that are most difficult to establish internal controls for are contract management and revenue recognition.
• Companies want to spend less time on data aggregation, manipulation, and validation and more time on business performance analysis.

Issue with EXCEL

Using Excel as the “system of record” for managing revenue

The problems were…

• Excessive time and effort to:
  • analyze and arrange an enormous amount of data
  • close the books
  • create journal entries
  • ensure accuracy
• Increased time and effort to manage accounting controls
• Inflexible reporting and analysis and the volume of data was growing

Missing Link

92% of companies said above, they are using spreadsheets for one or more of the following key revenue recognition and reporting tasks:

• Applying revenue allocation rules
• Redistributing revenue (e.g. based on SOP 97-2, EITF 00-21)
• Creating revenue recognition schedules for future periods
• Reviewing sales orders to identify deferred items
• Performing revenue contribution analysis
• Reporting on future revenue streams
• Creating accounting entries

Regardless of whether your company is private or public, does your organization recognize the importance of consistent and reliable revenue recognition ?

Revenue Recognition

Revenue Recognition 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:
  • Evidence of an arrangement exists (governing contract & PO)
  • Delivery has occurred (transfer title and risk of loss)
  • Fee is fixed or determinable (normal payment terms)
  • Collection is probable (customer has ability to pay)

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

Revenue Requirements

Challenge that software companies face results from the volume and complexity of the revenue recognition guidance that exists.in such case, software arrangements include both software and services. The services could include installation, training, software design, or customization and modification of the software. If the services involve significant customization or modification of the software, then contract accounting under SOP 81-1 should be used for the arrangement.therefore , under such senario , Revenue Requirement should mainly focus on .

1. Compliance
   • Calculate VSOE(Vendor-Specific Objective Evidence / ESP (Estimated Selling Price)
   • Manage VSOE/ TPE(Third Party Evidence)/ESP
   • Tolerances
2. MEA (Multiple Element Arrangements)
   • Track MEA from multiple sources
   • Classify elements
3. Revenue Recognition
   • Standalone sales
   • MEA
   • Rev rec carveouts according to VSOE/TPE/ESP
   • Deferrals & rev rec timing
   • COGSs
   • GL Posting
4. Reporting
   • Revenue compliance
   • Billing and revenue reconciliation
   • Revenue forecasts
5. Notifications
   • VSOE reference during pricing
   • Rev rec related notifications (approved exceptions, renewals, collectability status, etc.)

Key Aspects in Revenue Requirements

• User-defined Revenue Contingencies
• Fair Value Analysis
• Auto Accounting Rules
• Amortization Methods

EBS R12 Revenue Management Enhancements, filling the Gap of Missing Link

Organizations will also find that Oracle Financials R12 allows them to manage revenue with greater flexibility and improved accuracy.

• Partial Period Revenue Recognition enables the generation of revenue recognition associated with contracts
• Revenue Deferral Reasons based on events specific to an enterprise’s business practices
• COGS and Revenue Matching synchronize the recognition of revenue with the associated COGS in compliance with Generally Accepted Accounting Principles

The Oracle Supplier Network (Oracle SN) in an online service managed by Oracle that provides electronic messaging services. It is open to all EBS , Fusion , Peoplesoft customers and their trading partners.

The Oracle Supplier Network (OSN) together with iSupplier Portal provide a complete supplier enablement portfolio – and helps achieve real-time integration generating important cloud spend management benefits such as cash conservation and lower costs-to-serve.

Oracle Supplier Network is part of Advanced Procurement suite and integrates seamlessly with other Oracle modules other modules including Purchasing and iProcurement.

The OSN includes quick on-boarding, a single connection point to a community of suppliers and the ability to automate routine paperwork associated with procure-to-pay business processes.

The Oracle Supplier Network also enables trading partners to track the delivery of all business documents with a Transaction Monitor for both test and production transactions.

The Oracle Supplier Network provides private, secure transaction management with trading partners of every size and level of sophistication.

Oracle Supplier Network Portal Lets You:

• Simplify Integration – Onramp trading partners quickly with features such as quick, web-based registration, company profile setup, and account maintenance capabilities.
• Minimize Integration Costs – Avoid cost of supporting individual connections, multiple protocols, and multiple standards.
• Track Performance – Track successful delivery of all message traffic. Deploy auto-retry capabilities for exceptions.
• Support Key Transactions – Support key procurement and payment transactions, including purchase orders, change orders, advance ship notices, and invoices.
• Simplify Support – Receive 24/7, award-winning technical support. Rely on infrastructure designed for resiliency, redundancy, and network security

The OSN includes quick on-boarding, a single connection point to a community of suppliers and the ability to automate routine paperwork associated with procure-to-pay business processes. The solution also eliminates the cost of maintaining point-to-point connections between customers and their suppliers.

The Supplier Network provides a set of services for the routing, translation and delivery of extensible markup language (XML)-based electronic commerce transactions, such as purchase orders, ship notices and invoices. Customers connect once to the Oracle Supplier Network, and the network automatically routes the procurement transactions to the supplier.

Already on the Oracle Supplier Network and available to customers is a pre-enabled community of suppliers including Corporate Express, HP, Kelly Services, OfficeMax and Staples. All Procurement customers and their suppliers can join the Oracle Supplier Network.

The supplier Network also enables members to track the delivery of all business documents with a Transaction Monitor for both test and production transactions. The Oracle Supplier Network provides private, secure transaction management with trading partners of every size and level of sophistication.

If you are buyer , or planning to use for your company/client

Currently OSN integrates out of the box only with E-Business Suite (11.5.10, R12.0, R12.1) and Peoplesoft 9.1 (to be made available in 2009) and Oracle Fusion Apps to use OSN to send POs and receive Invoices

REFERENCE

OSN Datasheet .