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Analytical Reports
Contract Receivables
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Analytical Reports

System 7 offers over one hundred reports and listings, many with Summary, Detailed and Exploded options to provide drill down and cross-sectional analysis capabilities. Detailed Reports present specific invoice, action item and payment transactions. Exploded Reports present transactions at the line item level, identified by Asset, Territory, Right, Distribution Channel in addition to status information. Exploded Reports can be sorted and filtered to present line items grouped by or limited to one or more of these criteria.

Reports present data from across the entirety of System 7. Reports focused on contracts pull information directly from receivables. Reports focused on royalties present rights management break outs. 100% integration eliminates all arbitrary information gathering boundaries, both current and historical. Data is never lost via summarization, deletion or disconnection. Audit trails and supporting history are retained in perpetuity.

The following list focuses on analytical reports. Forms, lists and queries are not included.

Contract Rights Management
Acquired Rights Asset Summary
Availability
Disposition of Rights
Time Line

Asset Rights Management
Credits
Participants
Releases
Restrictions

Acquisition/Development Contracts
Payment Analysis
Payment Status
Contract Expirations
Contract Status

Sales Contracts
Revenue Recognition Status
Sales Fee Summary
Contract Expirations
Contract Status

Participations Payable
Participations Due
Payment Analysis
Performance

Royalty Receivables
Royalties Due
Royalty Analysis
Royalty Comparison
Royalty Performance
Royalties Delinquent
Royalty History
SKU List

Receivables
Aging
Invoice History
Payment History
Cash Flow Projection
Unapplied Cash Status
Cash Deposit History
Cash Receipts Log
Contract Fee Receivables

General Ledger
Revenue Position
Deferred/Current Movement
Deferred/Current Status
G/L Transaction History

Sales
Sales Analysis
Guarantee Analysis
Agent Commission Analysis

Calendar
Action Status
Action Calendar
Workflow Analysis

Contract Revisions
Acquisition/Development Contract History
Sales Contract History
Version Comparison

Contract Receivables

System 7's Revenue Accounting module is unique in offering a true invoice line item oriented Accounts Receivable data structure. Traditional receivables modules use Invoices as their core unit of information, with passive links to Customers and Line Items through source Work Orders whenever more detail is required. The revenue implications of an Invoice are posted to the General Ledger at the line item level, and effectively forgotten within the receivables Transaction Register. Manual Credit and Debit Memos are then required to adjust Invoice content and impact. In an intellectual property licensing environment, this database design effectively disconnects accounts receivable transactions from their source contracts, eliminating all possibility of contract-driven automation while severely hindering most opportunities for executive access to much of the corporation's best performance data. Without Invoice Line-Item Driven Receivables the following become practically impossible: Availability-based Revenue Recognition, Contract Revisions, Agings by Asset, Cash Receipt Dispute Allocations, Automatic Royalty Clearance Invoicing, Overage Invoice Generation, Cash Basis Participations Payable, Integrated Cash Flow Projections and Unapplied Cash Management.

Revenue Recognition

Real world intellectual property finance and accounting involves a number of unusual pre-defined General Ledger accounts in its core processing. Each contract may potentially reference unlimited combinations of Assets, Territories, Rights and Distribution Channels to define its grant of rights. Every one of these combinations may be represented on the General Ledger, or a special purpose sub-ledger to recognize all cash-basis and accrual revenue recognition and adjustment impacts. Revenue recognition status through the lifecycle of the contract determines precisely when to calculate and post the impacts of foreign currency fluctuations, participation liabilities, sales commissions due and royalty guarantees. The challenge is for a system to produce invoices and statements that are clear and concise while maintaining the underlying detail necessary to successfully handle the myriad of contingencies that frequently surface as a consequence of disputes, amendments, options, exclusions and other surprises.

Unrecognized Revenue
Unrecognized Unbilled Revenue
Unrecognized Billed Revenue
Recognized Revenue
Earned Cash Revenues
Unearned Cash Revenues
Foreign Exchange Gain-Loss
Tax Withholding Deductions
Earned Sales Commissions
Unearned Sales Commissions


Contract Revisions

Intellectual Property contracts typically extend from 1 to 10 years (sometimes in perpetuity!) in granting rights to exploit multiple assets in multiple territories in multiple ways through multiple distribution channels with varying exclusivity, contingent expiration dates, occasional language restrictions and dynamic payment, royalty and guarantee schedules. This run-on sentence is designed to emphasize that over the life of any financially significant agreement, there are countless possible reasons that a change must be made to its key business terms. Each time one of these changes is made (for example deleting or adding an asset) general ledger postings must be reevaluated, invoices adjusted, cash reallocated, rights reassigned, participation shares recalculated and royalty collections recategorized. The simplest revision typically creates dozens, hundreds or thousands of new transactions, all of sufficient precision to be properly represented in all reports, queries, databases and financial statements.

Participations

Revenue Recognition for the purposes of compensating intellectual property suppliers and business partners differs significantly from the requirements of Accrual or Availability accounting. Participations Statements primarily consider net cash collected per asset with deductions for unrecognized cash revenue (typically due to pre-delivery licensing of an "under construction" asset). To properly support those calculations, Cash Receipts applies cash payments to specific Asset, Territory, Right and Distribution Channel combinations. Short payment of an invoice is precisely tied to the particular line item(s) whose payment is being delayed or disputed. Contract Revisions permanently resolve these issues by identifying the invoice line items being adjusted or reversed and reallocating cash-basis revenue recognition when appropriate. Timely processing of adjustments to cash revenues is essential to assuring that Participants are not inappropriately over or under paid due to erroneous revenue reporting that must then be awkwardly reversed in subsequent periods.

Workflow Integration

Event calendaring triggers actions at all levels within a system to efficiently notify external parties and impact internal system functions. Date contingent contractual activities may be system-wide, contract-wide and invoice-wide, or intimately tied to specific assets, territories, rights or distribution channels, either within invoices or across multiple related agreements. Key contractual activities, including Marketing and Product Approvals, are defined by asset, asset group or asset/territory. Invoices and payments may be triggered by successful completion of these approvals or other asset-specific deliveries and releases. The interplay between "parent" invoices and "child" line items is usually highly dynamic throughout the contract lifecycle. The success of this interaction depends upon an underlying data structure design that provides both visibility and processing power at all levels.

A Summarized Example

Initial Scenario

1. 2 Book Titles - 3 Year Sub-Rights License - $100,000
2. Estimated start of term: 30 June 2004.
3. Sale Made in 31 January 2003. French Language Rights, Retail Distribution Only, in France.
4. Three Installment Advance Payments - 50% on execution, 25% 31 January 2004, 25% To Be Determined.
5. Advances recoupable through 6% royalty rate on net wholesale distribution revenues.
6. Guarantee equals $50,000 for each year of the agreement, non-cumulative, proportionate to Advances. Cross-collateralized between both titles.
7. Revenue Recognition (availability) estimated 30 June 2004 for both titles. TBD payment tied to availability.
8. Title 1 Licensed for $60,000. Title 2 Licensed for $40,000.
9. 10% Foreign Withholding Tax on both titles.
10. 15% Sales Commission due against first payment only.
11. Currency is reevaluated quarterly and recorded as a gain/loss in General Ledger.

Contract Revision

1. Revision made 30 June 2004 to deleted Title 1 as unacceptable to licensee. Title 3 is substituted for a License Fee of $40,000 ($20,000 less than Title 1).
2. Title 3 is estimated to become available 30 September 2004.
3. To Be Determined Payment is now set at 30 September, with a new balance of $5,000 ($25,000 balance, less $20,000 credit on deletion of more expensive Title 1).
4. Guarantee adjusted to $30,000 for year one, $40,000 each for years two and three.

Impact Summary

Initial Scenario

1. General Ledger Revenue Recognition
2. General Ledger Cash Revenue Recognition
3. Accounts Receivable Open Invoices
4. Advance and Guarantee Recoupment
5. Foreign Exchange Gain-Loss
6. Sales Commissions Due
7. Scheduled Invoice Cash Flow Projections

Contract Revision

1. G/L Title Account Reversal and Reallocation
2. G/L Cash Account Reversal and Reallocation
3. A/R Invoice Line Item Credit Memo
4. A/R Unapplied Cash Reapplication
5. Advance Recoupment Reapplication
6. Guarantee Shortfall Billing Recalculation
7. Foreign Exchange Gain-Loss Adjustment
8. Sales Commissions Due Reversal and Reallocation
9. Cash Flow Projection Batch Postponement

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