Most public companies adopted the highly-anticipated new revenue recognition standard during 2018. The revenue standard not only provides new accounting guidance, but also requires a significant number of new disclosures, intended to provide greater transparency to investors about a company’s revenue contracts and related accounting policies. As expected, these disclosures have been a recent area of focus of the SEC’s Division of Corporation Finance as they perform their reviews of registrants’ financial statements.
We reviewed publicly available SEC comment letter correspondence for registrants that have adopted ASC 606 to identify key themes. In general, the SEC staff’s comments have focused on areas requiring judgment, including timing of revenue recognition, the number of performance obligations, estimates of variable fees, and principal versus agent assessments (gross versus net reporting of revenue).This publication highlights the areas of the revenue standard addressed in the SEC staff’s comments, including certain industry themes and may help you as you navigate the year end financial reporting cycle.
What has the SEC staff commented on in letters to companies on the new revenue standard? In this podcast, we examine some of the SEC comment letters related to companies who have adopted the new revenue standard and have received comment letters through October 2018. From our review of the letters, we’ll discuss our observations, including: