Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m here today with Ryan Istre, an Audit Director and a member of the PKF Texas SEC team. Ryan, welcome back to The Playbook.
Ryan: Thanks for having me, Jen.
Jen: So, with the revenue recognition rules for ASC 606 that have come out and were applicable as of January 1, 2018, what do we need to know about that?
Ryan: That’s a good question, Jen. So, the SEC hasn’t had a whole lot of new comment letters come out about ASC 606. We do probably expect a lot of those to come out right around February and March of next year, because that’s when the companies will have a full cycle of revenue recognition under their belt for the full year.
Jen: So, do you expect them to come out with anything else?
Ryan: Again, they haven’t ever said officially. We’ve just sat through forums and a lot of CPE updates, and what we’ve heard to this point is that the SEC is suggesting that while most of the companies that they’ve been reviewing have been meeting the minimum requirements, they are suggesting that there are still a few more quarters that are available for the rest of the year for them to actually beef up their disclosures. So, we’re thinking they might believe a little deficiency is there but probably not enough to issue a formal comment letter so far.
Jen: Now, are there things in the disclosures that you’re recommending be enhanced based on that?
Ryan: Yes. So, what we’ve heard is that they’re recommending enhanced disclosures around what constitutes a specific performance obligation and what management is determining is the actual point in time in which the companies are meeting those performance obligations.
Jen: Okay, so it sounds like there’s definitely more information to come and that they should if they’re looking at it at all they need to contact someone like you so that we can give them guidance on what to do.
Ryan: Exactly. That would be a good idea; definitely contact the auditors, contact us. What we’ve heard in recent forums is that the Office of the Chief Accountant will continue to respect companies’ disclosure practices and procedures if those disclosures are well-grounded and based upon the principles of the new revenue recognition guide. So, I guess we’ll have to wait and see.
Jen: Yeah, so, let’s get some real-world application and see if it makes common sense maybe?
Ryan: Common sense, principles-based – it’s a toss-up, but only time will tell.
Jen: Perfect. Well, we’ll get you back once we know more information.
Jen: Thank you. For more about this topic, visit our Revenue Recognition Central page on PKFTexas.com. This has been another Thought Leader production brought to you by PKF Texas The Entrepreneur’s Playbook. Tune in next week for another chapter.