This week’s edition covers notable filings and news articles regarding ASC 606. To quickly identify key areas, open each link and search for “606” or “2014-09” in the text.
Recent Filings
PLEXUS CORP., 10-K
Our thoughts: In the “Recently Issued Accounting Pronouncements Not Yet Adopted” section, starting at the bottom of page 49 and running through the top of page 50, is the company’s assessment of ASC 606’s impacts. It outlines the company’s project plan to adopt and then discusses how ASC 606 will have material impacts on its revenue policies, procedures, and financial results on a qualitative basis. It caps the discussion with a quantitative picture of expected impacts.
PTC Inc., 10-K
Our thoughts: The “Recent Accounting Pronouncements – Revenue Recognition” section, starting on page 50 and going through the bottom of page 51, is highly instructive. While the company has not yet adopted ASC 606, its work to date appears to be comprehensive. It does a relatively deep dive into the complexities of its contracts and juxtaposes those against the specific steps of ASC 606’s 5-step model. It then discusses that contract terms are being revised specifically due to ASC 606. Beyond those points, the qualitative information put forward explains how the timing of revenue recognition will change in ASC 606 and the reasons behind those decisions. Finally, quantitative information is supplied to support its assertions. Overall, it appears to be a textbook example of how a company can present expected impacts of ASC 606.
News and Useful Information
InformationWeek, The CIO’s Role in the Supporting a New Revenue Recognition Standard, by Mark Davis and David Pierce, Deloitte
Our thoughts: The article brings value written from a non-Finance/Accounting point-of-view. Specifically, it looks at ASC 606 from a CIO’s perspective and gets to the point quickly, and cleanly, about why CIOs, and their teams should care about ASC 606. This article offers practical considerations and next steps for IT and compliance leaders at companies. These are valuable both for private companies about to adopt, and for public companies approaching the end of ASC 606 Year 1 where it will be time to assess their implementations, impacts, and look at improvements going into 2019.
The Motley Fool, Here’s Why Amyris Is Getting Obliterated Today, by Maxx Chatsko
Our thoughts: This is a short article that discusses a current example of how the ASC 606’s principles-based approach that requires significant judgements and estimates negatively affects a company’s results if done incorrectly. This article discusses how estimates on royalties were flawed under ASC 606 leading to a material drop in its financial results.
Bloomberg BNA, Tech Companies Log Billion-Dollar Boost From Accounting Change, by Amanda Iacone
Our thoughts: Informative article that focuses on the income statement impacts of ASC 606. This perspective is seldom touched on by other articles. It points out areas of financial statements that should not be impacted by ASC 606 and therefore could be relied on as a baseline for comparison through adoption of the new standard.
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