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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
The summary above is intended to provide a high level overview of the areas of disclosure that the SEC staff has been commenting on in the last year. Examples specific to this industry are as follows.
Comment examples
Guidance references
  • Given the significance of Non-Interest Income to your operations, please revise future filings to include the disclosure requirements in ASC 606-10-50 in the Summary of Significant Accounting Policies and Notes to the Consolidated Financial Statements.
  • Although you disclose that you recognize revenue pro-rata over the terms of your customer contracts, it appears from your average acquisition cost disclosure and from your deferred revenue policy note that you recognize your sign-up fee revenue immediately at the time of new member enrollment. Please tell us how you account for your sign-up fee revenue. In your response, reference for us the authoritative literature you rely upon to support your accounting and explain why this revenue stream falls either under insurance accounting guidance or general revenue recognition guidance.
  • Please provide disclosure in your periodic reports for contract liabilities in the form of your deferred revenue that: indicates the amount of revenue recognized in the reporting period that was included in deferred revenue at the beginning of the period as required by ASC 606-10-50-8b; and explains when you expect to recognize as revenue your deferred revenue as required by ASC 606-10-50-13b.

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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