Revenue Management Cloud Service

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3. Revenue Management Cloud Service Highlights and Customer Adoption [CON8402] Tapomoy DeySenior Director, Financials Development

4. Agenda • Why Revenue Management • Solution Footprint • Solution Deep Dive • Customer Traction • Converged Revenue Standards (IFRS 15/Topic 606) • Q&A

5. Why Revenue Management The Business Challenges: Compliance, Integration, and Automation • Pressure to comply • US GAAP Current Guidance ASC/ASU (SOP 97-2, EITF-08, etc.) • Auditable Transactions • Many sources of truth • Spreadsheets • 3rd Party Bolt-On’s • Demand for automation • Manual processes for key revenue recognition activities slow down the period close

6. Why Revenue Management Use Case: A Software Contract Revenue Reallocation Software License TPE VSOE ESP Selling Adjusted Software License Support Consulting 100 20 80 98 26 76 Customer Bill Software License Support Consulting 100 20 80 Support 200 200 Total Revenue Schedule 200 Total Period I Period II Period III Consulting Software License Support Consulting 98.00 8.66 16.00 0.00 8.67 20.00 0.00 8.67 40.00 122.66 28.67 48.67 Total

7. Agenda • Why Revenue Management? • Solution Footprint • Solution Deep Dive • Customer Traction • Converged Revenue Standards (IFRS 15/Topic 606) • Q&A

8. Solution FootprintCentralized, Automated Revenue Management Cloud Service Revenue Sources Automated Compliance Actionable Analytics and Reporting Centralized workarea Spreadsheet Integration Reference data REVENUE MANAGEMENT Revenue accounting

9. Revenue Management Cloud Service Co-Existence Functional Architecture 3rd Party EBS Accounts Receivable EBS Order Management EBS Projects EBS Service Contracts Revenue Events Extracted via Delivered Source Views Revenue Management Create Schedules Manage Compliance Create Accounting Audit & Analyze • Separate revenue from billing • Create ratable, immediate, and deferred revenue schedules • Generate revenue and deferred revenue entries • Automatically create compliance adjustment entries • Calculate and manage Fair Market Value (FMV) • Support Multiple Element Arrangements (MEA) • Seeded revenue reports for compliance reviews and audit • Ad hoc reporting layer Customer Acceptance Payment Revenue Accounting EBS Accounts Receivable EBS Costing General Ledger EBS Order Management

10. Agenda • Why Revenue Management? • Solution Footprint • Solution Deep Dive • Customer Traction • Converged Revenue Standards (IFRS 15/Topic 606) • Q&A

11. Revenue Management Cloud ServiceKey Business Challenges Addressed AUTOMATION Automation of contract identification, fair value price and compliance adjustments ACCURACY Centralized repository for reporting and accounting COMPLIANCE Audit trails and approvals ensure accurate revenue processing

12. Key Business Challenges AddressedDemand for Automation • Calculate and Manage Fair Market Value • Automatically groups stand alone sales based on user defined pricing dimensions • Supports multiple representations of fair market value Demand for Automation • Identify Contracts • Automatically identifies elements as part of a Multiple Element Arrangement (MEA) • Supports cross application and cross document MEA’s Automation of contract identification, fair market value and compliance adjustments • Allocate Revenue • Automatic validation of compliance with fair market value • Creates adjustments based on residual, relative or two-step method

13. Calculate and Manage Fair Market Value • Support VSOE TPE, and ESP Establish VSOE Value

14. Calculate & Manage Fair Market Value Review & Establish VSOE Values • Access to Bell Curve & Trend Graph and Underlying Standalone Sales

15. Identify ContractsAutomate identification of Multiple Element Arrangements Identification Rules 3 Sources Line 1: Service Contracts Line 3: Order Management

16. Allocate RevenueEnsure Appropriate Allocation Treatment FMV Ranges Adjusted Revenue Carved Amounts

17. Key Business Challenges AddressedMany Sources of Thruth Many Sources of Truth • Separate Revenue from Billing • Revenue document consists of line(s) from a source document and encompasses the revenue timing and amount • Automatically assign contingencies to defer and recognize when appropriate • Generate accounting entries Centralized repository for reporting and accounting • Adjust Revenue • Revenue allocations automatically calculated, accounted and visible on the Revenue Document • Schedule, unschedule, add and expire contingencies when necessary • Manage Revenue • Workarea provides centralized view of revenue tasks and status • Central reporting platform for all revenue processing

18. Separate Revenue from BillingRevenue Document Captures Key Revenue Processing New Internal Document Source Info Revenue Scheduling

19. Adjust RevenueEnsure Accurate Revenue Accounting Document Amounts Associated MEA Selling Price vs. Revenue Price

20. Adjust RevenueProcess Revenue Adjustments in Mass Robust Search Multiple Actions Full History

21. Manage RevenueImmediate and Actionable Access to Revenue Transactions Take Immediate Action Immediate Notification

22. Manage Revenue Analytics and Tools • Pre-seeded Revenue Forecast Report by: • Customer • Periods • Products • Sales Rep • Pre-defined Oracle Transactional Business Intelligence Subject Areas : • Fair Market Value • MEA Carve-out • Revenue Recognition • Source Documents

23. Key Business Challenges AddressedPressure to Comply Pressure to Comply • Audit Revenue Transactions • Understand all actions performed both by the system as well as the user • Full audit trail provided when user overrides system derived calculations Audit trails and approvals ensure accurate revenue processing • Approve Revenue Transactions • Require approvals and research to ensure appropriate compliance handling • Process exceptions and adjustments with full audit trail capability • Comply with Accounting Guidance • Supports complex US GAAP revenue requirements

24. Audit Revenue TransactionsAdjustment History Tracks all Actions Performed (MEA) Link to Revenue Doc Each Adjustment Tracked Separately

25. Audit Revenue TransactionsAdjustment History Tracks all Actions Performed (Revenue Doc) All Actions on the Revenue Document are Displayed

26. Approve Revenue TransactionsProactively Manage Compliance Approvals Fair Value Approvals MEA Approvals

27. Comply with Accounting GuidanceMeet Strict Revenue Accounting Requirements Displays how Adjustment Amounts were Calculated Compliance Details

28. Comply with Accounting Guidance Prepackaged Reconciliation Reports • Makes it easier to reconcile and validate your revenue and deferred revenue numbers with two pre-built interactive Business Intelligence Publisher (BIP) reports • Billing and Revenue Comparison Report • Supports Customer Level Comparison • Net Revenue (Revenue Minus Net Billing) • Deferred and Recognize Revenue • Net Billing to Revenue Differences • Offers drill to underlying MEA and Revenue Document detail • Revenue Management Reconciliation Report • Compares Revenue and Deferred Revenue Balances in Revenue Management and General Ledger • Identifies Activities to enable reconciliation • Offers drill to underlying activity and journal detail

29. Comply with Accounting Guidance Audit and Analysis Tools • Offers pre-defined Revenue Management specific Subject Areas and standard reports to analyze and audit: • Fair Market Value • MEA Carve-out • Revenue Recognition • Source Documents • Increase your accuracy and efficiency in auditing and analysis of revenue related activities by: • Centralizing your revenue-related data into a single repository • Jump starting your analysis and auditing with standard reports • Creating your own custom reports using a robust platform and revenue specific subject areas

30. Agenda • Why Revenue Management? • Solution Footprint • Solution Deep Dive • Customer Traction • Converged Revenue Standards (IFRS 15/Topic 606) • Q&A

31. Revenue Management Cloud Service 21 Customersprovided development and design feedback Generally AvailableRelease 8 RevenueManagement 7 Usability sessions Week Long validation session Over 3,000 hours testing

32. Revenue Management Cloud Service Adoption

33. Revenue ManagementQuotes from Hands-on Validation Session “Ability to drill from high level Fair Value information to the details with one click adds tremendous value for us.” “The workarea is great. Having all the information pushed to the users for action is terrific.” “We really liked the flexibility for Multiple Element arrangement identification.” “We love the spreadsheet integration, this is key for us.”

34. Agenda • Why Revenue Management? • Solution Footprint • Solution Deep Dive • Customer Traction • Converged Revenue Standards (IFRS 15/Topic 606) • Q&A

35. Converged Accounting Standards Timeline • The new Revenue standard became both US GAAP and IFRS on May 28th, 2014 • US GAAP Topic 606 published as ASU 2014-9 • IFRS 15 • Text is identical; references to GAAP and to IAS are different; minor difference to ensure identity of meaning by reference to different glossaries; differences in transition and take up options • Implementation Timeline: • Effective date is set for first new fiscal after January 1, 2017 • 2 Options on Retroactive Reporting All Companies Live on New Rules + FRM1/12017 Start data capture for transitional reporting 1/1/2015 Standard Final 5/28 New Year 2016 OOW 2015 OOW 9/28 OOW 2016 25 2017 2014 2016 2015

36. Converged Accounting Standards Applicability Concept Applies to All Companies, All Industries, All Countries • Industries • All, except Insurance and Lease vendors • GAAPs • Changes to both US GAAP and IFRS • Repeals (withdraws, cancels) the following US GAAP & IFRS statements • US GAAP (Codification): Topics 340-20, 360-20, 430, 605-15, -20, -25, -28, -30, -35, -50, 908-605, 910-605, 912-210, 912-235, 912-605, 915-605, 920-310, 920-605, 920-845, 922-430, 926-430, 926-605, 926-845, 928-430, 928-305, 932-605, 940-605, 942-605, 948-605, 952-340, 952-720, 954-340, 970-605, 976-605, 978-605 and 985-605 • Amends many others. • IFRS: IAS 11 and 18

37. Converged Accounting Standards Highlights “Performance Obligations” replace “Deferred Revenue” • All companies to identify Contracts – combinations of Customer Obligations that are related as a contract for accounting purposes. Example: Car + x years free service • Recognize Revenue on performance obligations you have satisfied – a “positive” definition, as opposed to “what you have billed, less carve-outs” or “lifted contingencies” • Recognize a monetary Customer Liability, “Performance Obligation”, (as opposed to deferring revenue) on performance obligations you have not satisfied but you do owe to customers • Recognize a Receivable only on your right to receive cash where the only condition is the passing of time (e.g. 30 days) • Recognize a Customer Asset, “Performance Asset”, on a conditional right to receive consideration for a satisfied obligation. A condition might be a requirement to complete satisfaction. • An open order is a Performance Obligation but not a Performance Obligation liability (3 conditions) • Value each obligation using “Observed Standalone” or “Estimated” Selling Prices apportioned to each element of the contract • No longer amortize a sales invoice to the P&L; instead, track (recognize and value, list and audit) performance obligations to customers – “obligations times SSP or ESP”, not “invoice minus released”

38. Converged Accounting Standards – Core Principle

39. The 5 Steps and Revenue Management Revenue Recognition • Performance Obligation Liability • Revenue Valuation using SSP, ESP • From Performance Obligations to revenue on customer satisfaction • COGSs • GL Posting Revenue Value Obligations Reporting 1 2 4 5 3 • Calculate Transaction Price • Manage Revenue Pricing (SSP, ESP) • Tolerances • Identify Contracts with Customers from multiple sources • Identify obligations • Revenue compliance • Receivables and revenue reconciliation

40. Applying the 5 Steps Use Case 1: A Typical Software Solution Provider Performance Obligations Revenue Values OSSP/ESP Software License Invoice 100 20 80 Software License Support Consulting 98 26 76 Customer Bill Software License Support Consulting 100 20 80 200 200 Transaction Total Support Performance Satisfaction Forecast 200 Transaction Price Period I Period II Period III Consulting Software License Support Consulting 98.00 8.66 16.00 0.00 8.67 20.00 0.00 8.67 40.00 122.66 28.67 48.67 Total

41. Applying the 5 Steps Data Capture and Bookkeeping for Use Case 1 (Software Solution Contract) Recognize Revenue Recognize CL Recognize CA Establish linked transaction price & constraint ID distinct performance obligation from “order lines” Apply relative observed SSP or ESP Search through “order lines” from many sources & Link E.G. Oracle Confidential – Internal/Restricted/Highly Restricted

42. Applying the 5 Steps Use Case 2: A Specialty Vehicle Manufacturer Performance Obligations Revenue Values OSSP/ESP Invoice Product 0 5,000 1,000 300 250 Custom Rack & Bedliner Truck Trailer 5-yr Maintenance 10-yr Roadside Etc… 4,000 2,000 280 270 PO 1000-10 PO 1000-20 Customer Bill PO 1000-30 PO 1000-40 Truck Custom Rack & Bedliner Trailer 5-yr Maintenance 10-yr Roadside Assistance 10-yr Extended Warranty Custom Trailer Doors Custom Hatch 5,000 Free 1,000 300 250 235 400 180 Maintenance 7,365 7,365 Transaction Total Performance Satisfaction Forecast Transaction Price 7,365 Period I Period II Period III PO 1000-10 PO 1000-20 PO 1000-30 PO 1000-40 Etc… 4,000 2,000 2.33 2.25 - - 2.33 2.25 - - 2.33 2.25 Custom Services 9,382.33 6.54 6.54 Total

43. Applying the 5 Steps Data Capture and Bookkeeping for Use Case 2 (Specialty Vehicle Contract) Recognize Revenue Recognize CL Recognize CA Establish linked transaction price & constraint ID distinct performance obligation from “order lines” Apply relative observed SSP or ESP Search through “order lines” from many sources & Link E.G. Oracle Confidential – Internal/Restricted/Highly Restricted

44. New Standards and Revenue Management Current Release

45. New Standards and Revenue Management Upcoming Releases

46. Choice of Transition Methods (Credit – KPMG) Dual reporting capability Dual reporting capability Timeline is based on requirements applicable to a public entity with December 31 year end. Nonpublic entities may defer application of standard for one year beyond public entity effective date.

47. Full Retrospective TransitionModel new rules in Revenue Management, compare and iterate as needed, and cutover in FY 2017 New Rules Apply FY 2017 Old Rules & Restatement until last balance sheet before adoption (2017) FY14, FY15, FY16,General Ledger Content EPM & Original Financial Statements EPM & Restated Financial Statements Existing RevenueRecognition Deferred Revenue Performance Obligation EPM & Original Financial Statements FY 17 General Ledger Content Compare and contrast old and new, in a tool of your choice Contracts Invoices Perf. Obligations Revenue Pricing Old Revenue New Revenue Other factors Model and Iterate Topic 606 / IFRS 15 Using Fusion Revenue Management Cutover

48. Agenda • Why Revenue Management? • Solution Footprint • Solution Deep Dive • Customer Traction • Converged Revenue Standards (IFRS 15/Topic 606) • Q&A

49. Questions?

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