Expand
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 (generalized to identify overarching themes, with specific details pertaining to individual companies omitted)
Guidance references
  • As it relates to your standard warranty with terms greater than one year, which you disclose obligates the company to replace parts or services your products, tell us how you considered the factors in ASC 606-10-55-33 in determining your warranties do not also include a service component and these warranties should be accounted for as a separate performance obligation in accordance with ASC 606-10-55-34. Include in your response a comparison of the warranty periods to the average life spans of each product type.
  • We note that when revenue is recorded, estimates of returns are made and recorded as a reduction of revenue. If material, please tell us, and revise to disclose how you account for returns, if different from other variable consideration. For example, please tell us and revise to disclose if you record a refund liability and asset for the right to recover goods from your independent sales force at the time of sale. See guidance in ASC 606-10-32-10 and 606-10-55-22 through 55-29.
  • Please tell us if the Company typically offers customers sales incentives and the nature of those incentives. To the extent material, expand your disclosure to highlight the amounts of such incentives and how the Company accounts for such incentives, including their impact on the determination of transaction price.
  • We note the discussions relating to the different services you offer to your customers. Please revise this note in future filings to address the following:
    • Identify each source of revenue and explain how you account for that revenue ("point-in-time" or "over time").
    • Explain how you account for revenues from your ongoing system performance monitoring service offered as part of your global network management services, which appears to also include software updates to customers.
    • Address your accounting for revenues from the rental equipment you deploy to customer facilities.
  • Please tell us how the separate revenue streams discussed on your earnings calls relate to your disaggregated revenue disclosures as the categories do not appear to be synonymous.

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.

Expand Expand
Resize
Tools
Rcl
Add to favorites
Please ensure
that you select
Print Background (colors and images) when printing.
CONTINUE
PwC image modal

This content is copyright protected. It is for your own use only - do not redistribute. These materials were downloaded from PwC's Viewpoint (viewpoint.pwc.com) under license.

Warning 2

✕

Welcome to Viewpoint, the new platform that replaces Inform. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory.

Viewpoint allows you to save up to 25 favorites.

Consider removing one of your current favorites in order to to add a new one.

Go to favorites

Are you sure you would like to remove this page from your list?

Yes
You are already signed in on another browser or device.
Click Continue if you want to automatically close other logged in sessions and continue. If you want to manually check for other active logged in sessions first, please select Cancel to go back to the previous page.
Need some help? Contact us
signin option menu option suggested option contentmouse option displaycontent option contentpage option relatedlink option prevandafter option trending option searchicon option search option feedback option end slide
✕

Hello and welcome to Viewpoint

Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. Follow along as we demonstrate how to use the site

Before we start.

Choose your preferred language below.