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Connor Group has released its third study of SEC SAB 74 disclosures made by US public companies regarding their adoption of Accounting Standards Codification (ASC) Topic 606, the new revenue accounting standard, which is effective for public companies starting in 2018, and its international analog IFRS 15. SAB 74 is the SEC requirement for public companies to discuss the impact of the adoption of recently issued accounting standards in their quarterly and annual financial statements. Previous studies were performed in July and November 2016.
The current study, which is based on periodic reports filed by over 300 companies with a market capitalization of at least $10 billion between November 11, 2016 and March 1, 2017, finds that 50% of companies (compared to 87% in our November 2016 study) indicate they have not yet completed the assessment of how ASC 606 will impact their financial statements. Many of those companies that were able to discuss the adoption impact concluded the adoption is not expected to have a material impact; among them, ABB, IBM, Oracle, Time Warner, Pfizer, Johnson & Johnson, Eli Lilly, and others.
Just six companies (Alphabet, Analog Devices, Ford, General Dynamics, Microsoft, and Raytheon) either adopted or plan to adopt ASC 606 early. About 60% of companies (compared to over 90% in our November 2016 study) did not indicate whether they will use the full retrospective or modified retrospective method for transition. Among the remaining companies, the number of companies using the modified retrospective method (93) exceeded those using the full retrospective method (34) by a factor of almost 3:1.
The study also includes example SAB 74 disclosures from several companies with varying extent of qualitative and quantitative information provided, including Ford, Microsoft, T-Mobile, GE, Amazon, IBM and American Airlines.
Download Full Study here: ASC 606 (IFRS 15) Disclosure Study March 2017 v6
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