We will update our significant judgment disclosure to reflect the timing of revenue recognition consistent with asc 606105012 and 606105018, which is included in. This population of relevant sec comment letters was determined and the filings were retrieved via. 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 companys revenue contracts and related accounting policies. Amazon pushes back on sec revenue disclosure comment. Most public companies adopted the highlyanticipated new revenue recognition standard during 2018. Nearly half of all comment letters mentioned disclosures, demonstrating the importance the sec places on the information companies share in their filings. In software companies, a third group should be thought of when the word contract is spoken. Ryans, j, dechow, p m and lawrence, a 2015 sec comment letters and insider sales. Sec says companies should brace for comment letters on new. They found 4,785 comment letters on revenue recognition during the study period. Comment letters are received from constituents in response to discussion papers, exposure drafts, and other discussion documents that are released to the public for comment. According to gaap rules on revenue recognition for software companies, producing a roadmap can be viewed as a commitment to provide the.
Sec says companies should brace for comment letters on new revenue rule. Comment letters are an effective mechanism to advocate for the profession and influence the adoption of sound policy and regulations in the areas of accounting, tax and finance. Sec comments on early reports under the new revenue recognition standard tended to sway companies to revise their reporting, analysis shows. In addition to discussing top areas of interestincluding revenue recognition, leases, and nongaapthey also provide a few best practices when responding to sec comments. Report on new revenue recognition standard details. San clara get your annual revenue recognition update here. Revenue recognition issues addressed in comment letters include 1 the. The sec is looking into revenue recognition in some transactions that took place in the u. Based on comment letters that address the revenue standard. Business combinations business combinations sec reporting considerations carveout transactions comparing ifrs standards and u. Software companies continue to analyze the impact of the new revenue standard on their contracts, accounting policies, and financial statements.
The securities and exchange commission is getting some pushback from amazon over staff requests for more disclosure regarding its recognition of revenue under a massive new accounting standard that. Contract modifications, repurchase agreements, disclosure, sec comment letters, significant differences with ifrs, asu 201818, software automation continued 2. Sec comments begin for early adopters of revenue recognition. Sec comments drove changes in revenue reporting, analysis says. Not surprisingly, computer software companies had the greatest tendency to draw scrutiny from the sec in. Marketwatch analyzed comment letters issued by the sec in 2018 and 2019 that had revenuerelated nongaap keywords and found companies were often being advised on how to handle.
Fei identified 21 companies that received comment letters from the sec related to the new revenue standard. Appendix c tips for searching the sec s database for comment letters 154. Sec may be set to crack down on companies that adjust revenue. This article details comments that a senior sec official put forward during an event in may 2018 regarding what companies should expect in terms of timing and focus of upcoming asc 606.
Intelligize report on new revenue recognition standard. For background information on what materials are released, timing, and confidential treatment, see press. Comment letters show sec forced restatement on asc 606, by tammy whitehouse our thoughts. Sec comments on early reports under the new revenue recognition standard tended to sway companies to revise their. An ibm spokesperson said the company is cooperating with the agency. Lessons learned from sec comment letters on the new. Abstract the accounting standards committee of the american institute of certified public accountants issued a. In its first white paper on the new revenue recognition standard, intelligize identified 32 early adopters companies that elected to adopt topic 606 during the 2017 calendar year. Preparing and filing all sec reports revenue recognition and recast experience, including vsoe, tpe and besp determination, and. The changes in standards will impact all companies, and even if the extent. In this podcast, we provide an introduction to the new revenue recognition standard. Kellog consulting, cpas principal kellog consulting. Insiders dump stock in advance of sec comment letters. The 2017 edition of sec comment letters including industry insights offers such.
However, previous revenue recognition guidance differs in generally. The second type of comment letters, between sec staff and sec filers, are contained in the secs edgar database. Other subjects of frequent sec staff comment include revenue recognition, income taxes, loss contingencies, business combinations and intangible assets. This group includes more than 30 companies that began using the revised topic 606 standard in 2017. This letter responds to your comments communicated to us in your letter dated december 14, 2017. Revenue recognition for software companies requires. Comment letters show sec forced restatement on asc 606. Revenue recognition tilts toward modified transition.
Sec comment letter observations on the new revenue. The second type of comment letters, between sec staff and sec filers, are contained in the secs edgar database see how to search for edgar correspondence. Sec sues volt information for allegedly misstated revenue. Martin gives a brief refresher on the sec comment letter process. Gaap consolidation identifying a controlling financial interest. The software entities revenue recognition task force has been created to address issues which may arise due to fasbs new revenue recognition standard.
Effects of roadmaps on revenue recognition for software. Revenue recognition for longterm constructiontype and productiontype contracts 43. The accounting literature on revenue recognition includes both broad conceptual discussions as well as certain industryspecific. Although this sounds odd, there is a relationship between the contract and the accounting. Sec comment letters lead insiders to dump shares cfo. Other features include 1 an update on the secs priorities. While the pharmaceutical industry led the way overall with 49 revenue recognitionrelated comment letters, followed closely by 43 for the prepackaged software sic code, the highest number of. Software revenue recognition a roadmap to applying aicpa.
Public comment letters relating to sec rulemaking and regulatory actions are found in the regulatory actions section of the sec s web site. Sec comment letters and insider sales lbs research online. The new revenue recognition standard made a significant impact on the way most companies recognize revenues. For over 17 years, softrax has pioneered the market with revenue recognition. Revenue recognition accounting update asc 606 acs live. The intelligize analysis also scrutinized sec comment letters on early adopters, finding that measurement of performance obligations generated 69. Sec comment letter considerations, including industry insights. Following up on the first intelligize whitepaper on revenue recognition, we also reexamined the progress of socalled early adopters. Revenue is one of the most important measures used by investors in assessing a companys performance and prospects.
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