Home ASC 606 ASC 606 Roundup: Paychex, Jamba, Inc. & more!

ASC 606 Roundup: Paychex, Jamba, Inc. & more!

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Posted by Graham Hulme on Jul 2, 2018 3:45:00 PM

This week’s edition covers both relevant news articles as well as a recent comment letter/company’s response on ASC 606.

To quickly identify ASC 606 information in the below links, click on the link, hit Control + F, enter the text “606” or “2014-09”, and click the down arrow button.

Are you reading these weekly rev rec blogs?  If so, please let us know what you think as we will tailor future weekly roundups to the most relevant, timely, content based on feedback from you, and as always, feel free to reach us at:  http://www.softrax.com/about/contact-us to learn more about SOFTRAX and the value we can provide for your company’s ASC 606 adoption!

 

The Motley Fool, “A New, Must-Know Metric Provides Insight Into Splunk’s Business”:

https://www.fool.com/investing/2018/06/26/a-new-metric-provides-insight-into-splunks-busines.aspx

 Our thoughts:  This article uses Splunk Inc’s adoption of ASC 606 to cast a light on the concept of “RPO”.  “RPO” stands for ASC 606’s focus on remaining performance obligations. The article takes Splunk Inc’s filings and walks through what this RPO metric represents and why it’s important to disclose in ASC 606.

 

Paychex, 8K Exhibit 99.1:

https://www.sec.gov/Archives/edgar/data/723531/000072353118000019/payx-20180627xex99_1.htm

  • Company will adopt on a full retrospective basis and recast FY18 and FY19.
  • Company references insignificant impacts to annual revenue but “some impacts to quarterly gaiting”.
  • Modest increase to operating income, net income, and DP for FY18.
  • Provided enhanced disclosures, footnotes, and disaggregation of revenues.

 Our thoughts:  Like other companies’ Exhibit 99.1 documents, this one provides an organized, consolidated, presentation of ASC 606 information.  This document leans more heavily towards presenting quantitative information rather than qualitative information due to its format and focus.  It’s a quick read with high value due to its centered focus on ASC 606.

 

 Jamba, Inc., 10-Q:

https://www.sec.gov/Archives/edgar/data/1316898/000156459018016202/jmba-10q_20180403.htm

  • Starting on bottom of page 8, the company details how it’s revenue recognition policies changed as a result of ASC 606 with quantitative and qualitative presentations.
  • Revenues from contracts with customers were disaggregated by revenue type (company store revenue, franchise revenue, royalties, upfront fees, advertising fees, gift card breakage, etc.) on page 9 with narratives on what each revenue type represents through page 10.
  • Contract balances and transaction price allocated to remaining performance obligation information is presented on page 11.
  • Impact to prior period information is presented on page 12.
  • Pages 16 and 17 present a “Known Events, Trends or Uncertainties Impacting or Expected to Impact Comparisons of Reported or Future Results” section that offers qualitative value in terms of descriptions of three key areas the company identified as ASC 606 having the greatest impacts.

 Our thoughts:  The company’s filing offers over 30 references to ASC 606 within it supplemented by an abundance of quantitative and qualitative presentations.  The company’s assessment of ASC 606’s highest level of impacts were in 1.) how advertising revenues and expenditures need to be handled, 2.) how recognition of revenue for initial franchise fees, development fees, and market opening fees (upfront fees) needed to change, and 3.) how gift card breakage needs to be handled.  This a detailed, high value, filing worth a read.

 

 

ASC 606 is not a challenge your company has to face settling for limited functionality in existing systems or through high risk manual efforts.  SOFTRAX provides superior experience, knowledge, products, and services to address your company’s ASC 606 needs.  We encourage you to visit http://www.softrax.com/about/contact-us to learn more about SOFTRAX and the value we can provide for your company’s ASC 606 adoption. 

Topics: Revenue RecognitionASC 606IFRS15SEC Comments