Salt Lake City headquartered Instructure, Inc. is an educational technology company which develops and publishes a web-based learning management system and Massive Open Online Course (MOOC) platform. Founded in 2008 by two college graduates, Brian Whitmer and Devlin Daley, Instructure began trading as a publicly held company on the New York Stock Exchange in 2015. In March 2020, Thoma Bravo completed the acquisition of the Instructure Group for approximately $2 billion.
The Business Challenge
Instructure’s global business model, providing software as a service, creates a financial reporting challenge for both the US and the UK. The US adopted US GAAP ASC 606 upon its implementation for listed companies. This transition saw a complete overhaul of the revenue processes for the US company. However, in the UK, Instructure Global Limited was reporting under UK GAAP’s Financial Reporting Standard 102 (FRS 102), where there was no corresponding revenue standard. The business was facing a challenge to align their UK reporting with the US, with the prospect of maintaining separate ledgers requiring consolidation adjustments at each year end.
“The transition to ASC 606 was a big move for us in US accounting, we’re grateful that you were able to provide a solution for us in our UK business.”
Adam Tullis, Senior Director of Tax
ZEDRA Corporate Reporting Service’s technical accounting team were able to offer an appropriate solution with a transition to Financial Reporting Standard 101 (FRS 101). This reporting standard offered the ability for the Company to adopt IFRS 15 which corresponds more directly to ASC 606, enabling the alignment of revenue recognition across the group.
In order to adopt FRS 101, the Company needed publicly available financial statements which made relevant disclosures. The UK company was included in the annual report of Instructure, Inc. where these disclosures were made. As a result, the UK company benefitted from providing few disclosures and preparing a smaller set of financial statements.
With these financial statements being publicly available, this opened other avenues for disclosure exemptions, such as consolidation exemption under Section 401 of the Companies Act.
The key outcome is that the UK and US can seamlessly align their year end reporting without the need for significant US GAAP to UK GAAP adjustments.
ZEDRA Corporate Reporting Service’s audit team conducted an onsite audit in Utah in February 2020 which covered in detail the revenue recognition under IFRS 15. Performing the work on site, alongside the Instructure revenue team, has proved to be a valuable asset in achieving a smooth audit.
Whilst remote audits are now commonplace for UK auditors dealing with overseas clients, in this case, meeting Instructure personally and having face to face contact added great value to the audit and enhanced our working relationship.
If you are a US headquartered company with operations in the UK, it is important to consider your local audit and accounting requirements and whether your reporting standards are aligned. You can read more of our Case Studies, meet some of the Team or get in touch to find out how we can help you streamline processes and stay compliant.