The effective date for the new Revenue standard is quickly approaching! Along with the accounting, you’ll need to think about the required disclosures as well. In this episode, PwC’s Jim Gazley, Roxanne Fattahi and Michelle Dion discuss disclosure requirements, practical expedients, specific examples and more.
| Duration 18:35
Prior to adoption, companies are required to disclose quantitative and qualitative information regarding the expected impact of adopting the new standard. These disclosures are expected to become more detailed as companies progress in their implementation of the new standard.
The new standard requires revenue to be disaggregated into categories that reflect how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.
There are several disclosure requirements related to contract costs. First, companies are required to disclose what judgments have been made in determining what costs are capitalized. Additionally, at each balance sheet date, contract costs need to be disclosed by main category, such as setup costs or pre-contract costs. companies also need to disclose the methods and amount of amortization, along with any impairment losses. Finally, companies are required to disclose whether they are applying the practical expedient that allows expensing costs of obtaining a contract if the amortization period is one year or less.
Companies must include relevant information to help readers understand the nature, timing and amount of future cash flows arising from performance obligations. Within these disclosures, companies should include information about remaining unsatisfied performance obligations and the allocation of the transaction price to these remaining performance obligations as well as when companies expect to recognize the related revenue.
Companies should disclose information about the methods, inputs, and assumptions used in determining the transaction price. This includes estimating variable consideration, adjusting the consideration for the effects of the time value of money, and measuring non-cash consideration to name a few. Companies should also disclose significant payment terms and obligations related to rights of return.
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