Many sports teams are private companies, yet they haven't assessed the impact of adopting ASC 606, Revenue from Contracts with Customers, which is the new standard. The effective date is just around the corner, so now's the time to undertake efforts to understand potential impacts. Our experience with revenue recognition for sports teams and leagues can guide you through the implementation process.
The new standard provides a new five-step model for revenue recognition, but of course each organization will be unique in terms of the precise impact resulting from adoption of the new standard. We believe there are certain types of arrangements that will, at the very least, require further consideration in assessing the adoption of this new standard.
As part of the adoption assessment, there may be downstream implications which should be considered. These implications may include an impact to debt or lease covenant compliance calculations and comparability of key performance indicators within management reporting. In addition to providing a new model for revenue recognition, the new standard provides guidance for capitalizing certain costs (e.g., commissions) and requires a number of additional financial statement disclosures. While certain of these disclosures are optional for private companies, there may be the need for an organization to collect and summarize data in a manner inconsistent with past processes.
First, we recommend beginning with an impact assessment. On average, we would expect an impact assessment to take six to eight weeks. Once the impacts are determined, we advise companies how to convert the organization to the new standard (e.g., quantify impacts, draft disclosures) and then assist teams as they assess how to embed the new practices and processes into the organization (e.g., education, policy roll out).
Managing Director, Sports Practice Leader, PwC US