As companies assess their implementations of the ASC 606 standard, many are looking to the first adopters and in particular, their initial disclosures and subsequent comment letters from the SEC. In this special-topic blog series from SOFTRAX, we take a look at what can be learned from your peers related to ASC 606. We'll round up what's noteworthy and point you to it with our commentary, so that you can focus your time on using these takeaways to help your own organization navigate the components of ASC 606.
This week’s roundup focuses on 10-Q’s submitted during the week of 5/7/18.
To quickly identify ASC 606 information in the below links, click on the link, hit Control + F, enter the text “606”, 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!
- ImmunoGen, Inc. 10-Q: https://www.sec.gov/Archives/edgar/data/855654/000155837018004485/imgn-20180331x10q.htm
- Both a qualitative and quantitative presentation of the impacts of ASC 606 on the company's financial statements is present, starting on the bottom of page 6 through the bottom of page 8 in the section title, "Financial Statement Impact of Adopting ASC 606".
- Additional detail regarding ASC 606's impact is found in the "Impact of ASC 606 Revenue Guidance on Financial Statement Line Items" section starting at the bottom of page 8 running through the bottom of page 10.
- Page 15 presents a "Contract Balances from Contracts with Customers" section.
Our thoughts: The summarized financial statement impact section of this filing offers value as an approach to consider for presenting ASC 606 impacts. Additionally, the “Contract Balances from Contracts with Customers” section offers a condensed, to the point, presentation of this information that could be instructive for filers going forward.
- The Dun & Bradstreet Corporation 10-Q: https://www.sec.gov/Archives/edgar/data/1115222/000111522218000011/a2018q110-q.htm
- This filing contains over 51 direct references to ASC 606 that span across all areas of the filings.
Our thoughts: Before and after pictures of financial results due to the company's adoption of ASC 606, as well as narratives to explain each impact, offer a holistic presentation of how the new standard impacted the company's accounting and finance processes, procedures, and results.
- XEROX CORPORATION 10-Q:
- Top of page 10 in "Note 3 - Adoption of New Revenue Recognition Standard" provides a statement on how the ASC 606 requirement to account for the incremental costs of obtaining a contract and costs to fulfill a contract led to a transition asset amount and net of tax increase to retained earnings.
Our thoughts: The costs of obtaining a contract and costs to fulfill a contract are key considerations that all companies need to critically evaluate when adopting ASC 606. This filing’s details on how the cost requirements of ASC 606 impacted the company’s retained earnings is instructive.
- The top of page 7 provides an explanation of the change in timing of revenue recognition for variable consideration for incentives paid to customers and franchise fees.
- Comparative financial results with adjustments due to ASC 606 are listed on pages 7 and 8.
- Clear statements on the practical expedients selected are provided on page 19.
Our thoughts: The detail on how variable consideration was handled by the company, as well as its presentation of comparative financial results, are the sections that hold most value for review.
- YUM! BRANDS, INC. 10-Q: https://www.sec.gov/Archives/edgar/data/1041061/000104106118000026/yum-3312018x10q.htm
- Page 9, in the "Franchise and Property Revenues" section, provides a summary of ASC 606 impacted the company's treatment of franchise fees.
- Page 11 provides a solid description and representation of how the company disaggregated its revenues by "Concept" and its most significant markets by Operating Profit.
- Pages 16 - 18 provide balance sheet and statement of income information with the impact of ASC 606 detailed for each row.
- In the "Adoption of Topic 606, 'Revenue from Contracts with Customers' " section on page 32, the bottom of that page offers a narrative on why it believes ASC 606 will negatively impact core operating profit in 2018.
Our thoughts: This filing references ASC 606 over 56 times which is a high number compared to other filings reviewed to date. In addition to the quantity of ASC 606 references, the quality of such references is also high. This is a well-defined filing that’s worth a review.
Which of the above filings provided the most value? What specific details of those filings were most relevant to your needs? We place high value and greatly appreciate any input regarding the above or any other revenue recognition/ASC 606 topics.
You don’t have to tackle ASC 606 alone! 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.