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ASC 606, Revenue from contracts with customers, requires more quantitative and qualitative disclosure than prior guidance. The following areas of disclosure have been addressed in the SEC staff's comments:
  • Performance obligations – the nature of performance obligations, why goods or services are distinct, and disclosure of remaining performance obligations; also, comments related to information provided in other parts of the filing that appear inconsistent with the number of performance obligations in a contract
  • Transaction price - the determination of standalone selling price, including methods, inputs, and assumptions that are used in estimating transaction price and allocation to performance obligations
  • Variable consideration – the determination of the transaction price and how a company estimates variable consideration
  • Recognizing revenue – the timing of when control transfers, the method of recognizing revenue over time, and accounting for licensing arrangements
  • Gross versus net presentation – judgments related to gross versus net presentation of revenue, including an assessment of whether the company controls the good or service being provided to the end customer
  • Disaggregated revenue – judgments related to the level of disaggregation disclosed, and disaggregation disclosures that appear inconsistent with information provided in other parts of the filing or in other forums, such as investor presentations
Comment examples (generalized to identify overarching themes, with specific details pertaining to individual companies omitted)
Guidance references
  • We note your contracts often include multiple performance obligations. Please provide a description of the distinct performance obligations and explanation of when they are typically satisfied. In addition, please disclose the methods, inputs and assumptions that you use in estimating the transaction price, including variable consideration where applicable. Reference ASC 606-10-50-17 through 50-20.
  • You indicate that you apply certain constraints to your estimates around your variable consideration to ensure they do not pose a risk of significantly misstating your revenue in any reporting period. Please clarify for us whether this is consistent with the guidance in ASC 606-10-32-11, and if so revise your disclosure accordingly. If not, please further explain your policy for constraining your estimates with reference to the guidance applied.
  • For each type of performance obligation you have, tell us whether it is recognized over time or at a point in time and specifically how it is satisfied as well as the payment terms. For those recognized over time, tell us the method you use to recognize revenue and why it represents a faithful depiction of the transfer of the goods or services.
  • Please tell us the nature of all third-party costs you incur on behalf of your clients. Provide us with your analysis of how you determined whether you are acting as a principal or as an agent in these arrangements. Tell us how you considered your role in creating or developing a client's marketing or corporate communications message. Please specifically address amounts paid to both media providers and production companies.
  • Please tell us what consideration was given to separately disclosing product revenue and service revenue by segment, as well as similar disclosures on point-in-time versus over time revenues. Tell us how you considered the guidance in ASC 606-10-50-5 through 7 and ASC 606-10-55-89 through 91.
  • You disclose in your Form 10-Q for the second quarter that your remaining performance obligations were $30 billion, and more than half of that amount is expected to be recognized as revenue over the next 12 months. Please disclose (either quantitatively using relevant time bands or qualitatively) when the remaining portion will be recognized. Please refer to ASC 606-10-50-13.

PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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