The revenue recognition standard and its implementation concerns Companies, Investors and the FASB

As we enter the 2018 Q1 filings season, we will start to see the extent to which the new revenue recognition standard Topic 606 (ASU 2014-09) impacts companies’ financial reporting and their disclosures.  This standard became effective January 1, 2018, for all calendar year-end public companies.

The standard and its implementation concerns Companies (who should be paying close attention to how their peers are disclosing their implementation of Topic 606), Investors (who should be interested in how Topic 606 impacts reported revenues and consequently earnings),  and the Financial Accounting Standards Board (who will be monitoring closely how the revenue standard they authored has impacted companies’ financial reporting and disclosure as part of the post-standard implementation review).

It is also worth noting that the Securities and Exchange Commission has been paying close attention to the implementation of Topic 606. Thus far, the SEC has issued over thirty comment letters related to the standard, and we expect to see even more as the current quarter progresses.  The comments touch on a variety of major aspects of the new standard, including the disaggregation of revenues, disclosures surrounding the performance obligation, timing of the satisfaction of the obligations, principal versus agent considerations, transaction price determination and allocation to contracts, and the costs in obtaining a contract. 

Recently, the Financial Executives International (FEI) used the idaciti platform to conduct their research on these SEC Comment Letters.  Here is the detailed report analyzed eight SEC comment letters that have since been issued related to the new revenue standard.

 FEI Research: Lessons Learned From SEC Comment Letters on The New Revenue Standard

How are these SEC Comment Letters useful to interested stakeholders?

Companies can use these as a resource to learn to avoid similar pitfalls of peer companies and hopefully improve their implementation of Topic 606. Investors can use these to update their valuation models and expectations based on companies providing further clarification in response to the questions posed by the SEC.  The FASB can assess whether further refinements would be required to clarify the reporting requirement of the standard. 

Performing SEC Comment Letter research has never been easier.  Using the idaciti platform, users can search for keywords pertaining to a topic area and see the results returned in seconds. 

The highlighting function available in idaciti enables the user to navigate efficiently to the relevant part(s) of the document and easily download the highlighted search results for all companies into a PDF document for record keeping or sharing with colleagues. 

Search Highlights

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