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 new 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 round-up targets recent S-1, 10-Q, and 10-K filings for companies that included ASC 606 adoption details and impacts.
(Note: To quickly identify ASC 606 information in the SEC links, click on the link, hit Control + F, enter the text “606”, and click the down arrow button.)
Pivotal Software S-1
Bottom of page 83 and page 84: Presentation of how the company applied each step of ASC 606’s five-step revenue model.
Bottom of page F-10 and page F-11: Summary of significant accounting policies with a presentation of information for FY16 and FY17 under ASC 605 and ASC 606 for side-by-side comparison.
Pages F-12 through page F-15 have a “Summary of Significant Accounting Policies” with detail on key ASC 606 areas evaluated and applied, such as:
- Variable Consideration
- Contracts with Multiple Performance Obligations
- Sales through Agency Arrangements with Strategic Partners
- Disaggregation of Revenue
- Costs to Obtain and Fulfill a Contract
- Remaining Performance Obligations
Our thoughts: This S-1 filing confirms that Pivotal adopted using the full retrospective method, which makes sense due to their IPO. The value of this filing is both its detail and scope, as it covers the main areas of ASC 606 that Pivotal identified as impacting its business. The key ASC 606 areas evaluated (as indicated below) align with those that have created the most disruption among all companies adopting the new standard.
SEARS HOMETOWN AND OUTLET STORES, INC. 10-K
- Bottom of page 59 and top of page 60 – The “ASU 2014-09” section provides a description of how the company’s balance sheet presentation related to returns.
Our thoughts: This 10-K is worth a review, as it covers how the company will handle the return of physical goods under ASC 606.
New York & Company, Inc. 10-K
- Pages 55 and 56 – The “Summary of Significant Accounting Policies” section provides detail on how the company is impacted by ASC 606 in terms of the timing of revenue recognition related to the company’s loyalty rewards programs and other sales incentives.
Our thoughts: The value of this 10-K filing is that it provides a good example of how a retailer adopted the ASC 606 requirements pertaining to the handling of sales incentives. Additionally, the company provides clear statements on what it did under 605 to handle such sales incentives, what it will do per ASC 606, and the anticipated impact on the timing and amount of revenues in such cases.
Danaher Corporation 10-Q
- Page 6 and top of page 7 – Example of qualitative and quantitative information in the “Notes to Consolidated Condensed Financial Statements” section, regarding the adoption of ASC 606, impact on retained earnings as of 1/1/18, and descriptions of performance obligations as well as how revenue is recognized under ASC 606.
- Bottom of page 10 – Example of ASC 606 remaining performance obligations disclosure narrative in the “Remaining Performance Obligations” section. The first paragraph explains what’s included and excluded in the company’s remaining performance obligations definition, while the second paragraph provides quantitative information in terms of amount, expected timing, and the expected percentage of remaining performance obligations to be recognized over time.
- Bottom of page 10 and top of page 11 – Representation of how the company presented “Contract Balances” information for ASC 606 broken down into “Contract Assets”, “Contract Liabilities”, and “Contract Costs” sections with qualitative and quantitative information including for each area.
Our thoughts: This 10-Q filing provides a solid working example of how a company expanded its presentation to present the various impacts of ASC 606. Additionally, a clear statement was presented on the ASC 606 impact on the company’s retained earnings as of 1/1/18.
Snap-On Incorporated 10-Q
- Page 12 – Representation of the effects of adjustments to the 12/30/17 consolidated balance sheet per ASC 606’s adoption in “Notes to Consolidated Condensed Financial Statements.”
- Bottom of page 12 and top of page 13 – Presentation of revenue disaggregation information per ASC 606’s requirements.
Our thoughts: This 10-Q filing offers a picture of how a company presents revenue disaggregation information. Revenue disaggregation information has not been consistently offered in our review of companies’ filings to date, making this a good reference point.
Chart Industries, Inc. 10-Q
- Pages 8 and 9 – Detail on impacts to financial statements due to ASC 606.
- Bottom of page 9 and top of page 10 – Significant accounting changes due to ASC 606 are detailed.
- Bottom of page 10 and page 11 – Detail on remaining performance obligations, disaggregation of revenue, and contract balances.
Our thoughts: This 10-Q is worth a review, as the filing covers an array of core ASC 606 topics and how those impacted the company.
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