This week’s roundup focuses on SEC filings submitted during the week of 6/4/18.
To quickly identify ASC 606 information in the below links, click on the link, hit Control + F, enter the text “606” or “2014-09”, and click the down arrow button.
Let us know what you think as we will tailor future weekly roundups to the most relevant, timely, content based on feedback from you, and as always, feel free to reach us at: http://www.softrax.com/about/contact-us to learn more about SOFTRAX and the value we can provide for your company’s ASC 606 adoption!
SPLUNK INC. 10-Q:
- The company adopted ASC 606 using the full retrospective method.
- Page 8 provides a description of the company’s adoption approach and high-level impact. One key note in this section relates to deferred revenue that was never recognized as revenue due to its ASC 606 adoption, “Additionally, some deferred revenue, primarily from arrangements involving term licenses, was never recognized as revenue and instead is now a part of the cumulative effect adjustment within accumulated deficit.”
- Page 36’s “Risk Factors” section offers details regarding the company’s assessment as to how ASC 606 could potentially have negative impacts on its financial results and operations. Notably, the company’s assessment that term licenses will now need to be recognized upfront is a focal point and worth a review.
Our thoughts: This filing has value as it provides a working example of how ASC 606 caused changes to the timing and amount of revenue recognized for specific performance obligations. Specifically, the “Risk Factors” section details how revenue recognition timing and amounts could differ depending on whether it sells term licenses, cloud services, or perpetual licenses and what it means for its go-forward operating and financial results.
SecureWorks Corp. 10-Q:
- Page 9 confirms it was a full retrospective adoption with a cumulative effect of adoption being a decrease to accumulated deficit of $51.8 million.
- Page 10 provides a qualitative presentation of how the company evaluated and applied the ASC 606’s 5 step model.
- Page 11 offers details on how the company handled ASC 606 requirements for contract liabilities, deferred commissions, and deferred fulfillment costs.
- Pages 12 and 13 provide a "ASC 606 Adoption and Revision Impact to Previously Reported Results" section that gives solid quantitative impacts for review.
Our thoughts: This filing addresses many of the main areas that ASC 606 requires. One interesting statement to consider, compared to other filings to date, is found on the top of page 11 as follows, "The Company's chief operating decision maker, who is the President and Chief Executive Officer, makes operating decisions, assesses performance, and allocates resources on a consolidated basis. There are no segment managers who are held accountable for operations and operating results below the consolidated unit level. Accordingly, the Company is considered to be in a single reportable segment and operating unit structure." It will be interesting to see if the SEC drills into this statement in greater detail to validate whether the company should consider presenting additional qualitative and quantitative details at a segment level or not.
NATHAN’S FAMOUS, INC. 10-K:
- The bottom of page 46 and top of page 47 identifies how recognition of the company’s franchise fees was impacted by ASC 606 where these now need to be recognized over the term of a respective agreement.
- Additionally, this section offers insight into how its reporting of advertising fund contributions from franchisees needs to change under ASC 606.
Our thoughts: This filing has value for companies that are franchisors as it offers quantitative and qualitative information on how the timing and amount of revenues recognized for performance obligations specific to franchisor – franchisee contracts need to be handled in ASC 606.
ASC 606 is not a challenge your company has to face settling for limited functionality in existing systems or through high risk manual efforts. SOFTRAX provides superior experience, knowledge, products, and services to address your company’s ASC 606 needs. We encourage you to visit http://www.softrax.com/about/contact-us to learn more about SOFTRAX and the value we can provide for your company’s ASC 606 adoption.