This week’s entry will run through recent notable and instructive 10-Q filings that had frequent references to ASC 606. Additionally, we also share a few notable articles.
To quickly identify ASC 606 information in the below links, click on the link, hit Control + F, enter the text “606”, “2014-09”, or “ASC” and go to your search results.
Filings
FACTSET RESEARCH SYSTEMS, INC: 10-Q For the quarterly period ended November 30, 2018
Our thoughts: The “Revenue Recognition” section of this filing starting on page 10, and going onto the top of page 11, offers a brief, yet effective, presentation when a company identifies that neither the timing nor the amount of revenue it recognizes will be impacted by ASC 606. Additionally, the company then goes on to explain how its costs were impacted by ASC 606. Finally, it offers a disaggregation of its revenues.
What’s valuable is the fact the company offers a detailed qualitative explanation, with targeted metrics, to support its findings. Additionally, it intuitively explains these points to the readers. It’s clear this was written to satisfy a broad audience rather than just ASC 606 specialists.
Articles
The Motley Fool: Amazon.com Should Give the SEC What It Wants
Our thoughts: This article does a great job of summarizing a series of events (chronicled in previous SOFTRAX blog entries) between Amazon and the SEC regarding ASC 606. It layers in references to Tesla’s and Oracle’s recent situations to paint a picture relevant to Amazon’s. Fundamentally, the article supports one of ASC 606’s goals which is to provide greater detail and clarity on the revenue a company derives from its contracts with its customers so that consumers of the financial statements can have a better understanding of the business.
Digital Transactions: Sales Pressure Led To Premature Revenue Recognition, USA Technologies Reports
MarketWatch, Inc.: USA Technologies to bolster corporate governance after probe uncovers accounting issues
Our thoughts: Both articles are worth a read as each pulls back the covers on what can happen when a lack of internal controls, pressures to hit sales targets, and an aggressive management approach to revenue recognition all lead to negative results for a company. In our view, it’s another example where full automation with a purpose-built revenue management solution, such as SOFTRAX, that fully audits revenue transactions end-to-end, would help prevent such a situation from occurring.
What level of risk are you willing to accept with your company’s ASC 606 adoption? What would the costs be to your company if it gets ASC 606 wrong? What would the costs be for you? We encourage you to visit https://www.softrax.com/contact/ for information on how SOFTRAX can help your company and you handle ASC 606.