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Revenue recognition disclosure examples

Assess your disclosure accounting practices

This is a critical time for organizations to assess their disclosure accounting practices related to the ASC 606 revenue recognition standard. To determine if you’re on track, examine revenue recognition disclosure examples from other companies, see how you stack up, and then determine if adjustments are needed.

Are you on the right track?

Public companies with fiscal years ending December 31 have now adopted the new revenue recognition standard and applied it for the first time to their quarterly reports. However, there’s still important work to do.

As a principles-based framework, ASC 606 relies heavily on the judgment. To help ensure your organization is on the right track, it makes sense to look at revenue recognition disclosure examples from other companies to see how they handled accounting for revenue recognition and related disclosure in their most recent quarterly reports, and then evaluate your own revenue recognition practices accordingly.

Seeing how you stack up

When benchmarking your company's accounting and disclosure practices for revenue recognition against those used by other companies within and beyond your industry, you may find:

Taking action

If your company's practices are out of line with others’ revenue recognition disclosure examples, you should consider carefully analyzing the differences and evaluate the possible need to take action.

Some key questions to ask include:

  • Did your company's initial judgment about applying the new revenue recognition principles lead to accounting practices outside of the mainstream?
  • Did your company choose to disclose too little (or too much) detail about revenue-related issues?
  • Are there opportunities to make the process of revenue reporting and disclosure more streamlined, effective, and sustainable?

If your initial analysis and benchmarking effort reveal significant variation from others, consider consulting with your auditor and advisers—as well as other companies in your industry—to get an outside perspective on choosing a preferred course of action.

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Comments from the SEC

The US Securities and Exchange Commission (SEC) is reviewing company filings and providing comments about changes companies need to consider related to revenue recognition and disclosures. However, it’s not expected that the SEC will comprehensively review all filings in the near term for companies having adopted the new standard. So lack of contact from the SEC doesn’t necessarily mean there are no issues to address. Ultimately, it’s each company's responsibility to understand what’s appropriate and achieve the required compliance.

It should be noted that there’s often a lag in the public availability of SEC comments. This could complicate your benchmarking effort by making it hard to know if other companies' current practices have been subject to SEC review or are in the process of being changed (whether driven by the companies' own internal benchmarking efforts or in response to SEC comments).

At the moment, it’s too early to draw general conclusions about the SEC's position on compliance with the new revenue recognition standard. The SEC Staff has said that they’re focusing first on whether there are accounting issues and, therefore, may not comment on disclosures until a later review. However, our initial observations from discussions with SEC staff—as well as our own reviews of numerous quarterly filings—suggest that improvement of disclosures may be needed by some companies.

In particular, the explanation of significant judgments may need to be more robust; examples include the description of performance obligations (what are they, how are they determined, when is revenue recognized) and key factors a company considered in a principal versus agent analysis.

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Next steps

If your company finds itself at either end of the compliance spectrum, it may have cause for concern—especially in these early days of the new standard when there’s still uncertainty and greater scrutiny over reporting practices.

Being an outlier at this stage may warrant attention and further evaluation. In areas where your company varies significantly from the norm, you may benefit from asking if there are different facts and circumstances that drove the variation, different judgments that are both reasonable and acceptable, or other reasons for taking a different approach.

Given the ongoing uncertainty, this is a critical time to assess your accounting and disclosure practices related to revenue recognition, examine revenue recognition disclosure examples, and evaluate if adjustments are warranted to bring your practices more in line with what others are doing.

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The services described herein are illustrative in nature and are intended to demonstrate our experience and capabilities in these areas; however, due to independence restrictions that may apply to audit clients (including affiliates) of Deloitte & Touche LLP, we may be unable to provide certain services based on individual facts and circumstances.

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