January 22, 2018
Volume 25, Issue 1

by Emily Childs, Eric Knachel, and Rob Moynihan, Deloitte & Touche LLP

Introduction

As a result of the recognition and measurement requirements in the FASB’s new revenue standard (ASC 606¹), some companies will need to make wholesale changes to their financial statements. For other companies, the effect of the new requirements will be less significant. However, all entities will need to carefully consider the standard’s new and modified quantitative and qualitative disclosure guidance, which will significantly increase the amount of information they should disclose about revenue activities and related transactions. Accordingly, since the standard’s mandatory adoption date² has either arrived or is rapidly approaching, companies are sharpening their focus on those disclosure requirements.³

This Heads Up provides insight into our review of the disclosures in the public filings of a group of companies that early adopted the standard in 2017. Entities adopting the standard beginning in 2018 may benefit from evaluating the disclosure trends we have observed as a result of this review. For a comprehensive discussion of the new revenue standard, see Deloitte’s A Roadmap to Applying the New Revenue Recognition Standard.

Key Takeaways The new revenue standard’s requirement to provide more comprehensive disclosures is likely to significantly affect an entity’s financial statements regardless of its effect on recognition patterns. We observed diversity in the type and amount of information entities have disclosed. Many early adopters have chosen to add a separate and specific revenue footnote that contains the required disclosures. When providing disaggregated revenue disclosures, the majority of early adopters used three or fewer categories. The most commonly selected categories were (1) timing of transfer of goods and services (point in time vs. over time) and (2) product lines. Most early adopters elected multiple practical expedients related to their ASC 606 disclosures, most commonly those related to remaining performance obligations. To the extent that the accounting standard setters clarify guidance and regulators issue more comments, we expect entities to continue to refine the information they disclose.

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