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Important Insights from Connor Group’s Latest ASC 606 Disclosure Study

Are companies truly ready for the new revenue recognition standard? SEC requests that more than 50% of companies expand their evaluation and implementation status for ASC 606.

Connor Group experts have just released their latest ASC 606 Disclosure study “Trends of SEC Comment Letters and SAB 74 Disclosure Related to ASC 606 (IFRS 15).” This study, as with those prior, revealed several important insights into the landscape of ASC 606 evaluation and implementation.

ASC 606 StudyThe first part of the study was conducted through an in-depth review of the SEC comment letters issued to date as of December 29, 2017. One notable insight was that more than half (55%) of the SEC comments requested that the companies expand their disclosures related to their evaluation and implementation status. Another key insight addresses the early adopters of the new standard. These comments mainly consisted of inquiries about the rationale for certain technical conclusions and requests to expand disclosure in specific technical areas. The study provides example comment letters and lists of companies who received the various types of comments.

The second part of the study looked deeper into the SAB 74 disclosures, which are made by large US-listed companies. This is the fifth study on this topic released by the team at Connor Group. The disclosures of over 300 companies were reviewed. This particular study led to several key insights, as of December 2017.

  • Over 80% of the companies sampled have elected an adoption method and 74% have indicated, on a high-level, whether the adoption will have a material impact or not. These percentages improved by 15~20% since our last study. However, given the limited time remaining to adopt for calendar year-end companies, a significant amount of work seems to remain.
  • Among the companies that have disclosed their adoption method, 80% have elected the modified retrospective, with 3 companies that previously elected the full method having switched to the modified method.
  • Companies that have early adopted the standard are Alphabet, Diageo, General Dynamics, Ford Motor, Microsoft, Raytheon, and Workday. Analog Devices has also decided to early adopt in November 2017.
  • Only 5% of the companies sampled have disclosed that the adoption will have a material impact. Almost 70% of the companies do not anticipate a material impact. A vast majority of the companies are yet to quantify the aggregate adoption impact.

To dig deeper into these insights, read through the various disclosures, view the data visually through the graphs and charts, and read Connor Group’s discussion on the findings, download the full study here!

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