Revenue Recognition

On August 18, 2017, the SEC staff released Staff Accounting Bulletin (SAB) No. 116 to conform its staff guidance on revenue recognition with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers. SAB No. 116 states that SAB Topic 13, Revenue Recognition, and SAB Topic 8, Retail Companies, are no longer applicable once a registrant adopts ASC Topic 606. It also modifies Section A, Operating-Differential Subsidies of SAB Topic 11, Miscellaneous Disclosure, to clarify that revenues from operating-differential subsidies[1] presented under a revenue caption should be presented separately from revenue from contracts with customers accounted for under ASC Topic 606 or as a credit in the costs and expenses section of the statement of comprehensive income. Prior to adoption of ASC Topic 606, registrants should continue to refer to prior SEC guidance on revenue recognition topics.

The SEC also issued two releases to update its interpretive guidance on revenue recognition:

Revenue Recognition for Bill-and-Hold Arrangements

Release No. 33-10402 states that upon adoption of ASC Topic 606, registrants should no longer rely on the bill-and-hold arrangement guidance in Release No. 23507 and Accounting and Auditing Enforcement Release (AAER) No. 108, In the Matter of Stewart Parness, because ASC Topic 606 provides specific guidance on recognizing revenue for those arrangements. Until a registrant adopts ASC Topic 606, it should continue to refer to the guidance in Release No. 23507 and AAER No. 108.

Accounting for Sales of Vaccines and Bioterror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile

Release No. 33-10403 states that vaccine manufacturers should recognize revenue and provide the disclosures required under ASC Topic 606 when vaccines are placed into Federal Governmental stockpile programs because control of the vaccines will have been transferred to the customer and the criteria to recognize revenue in a bill-and-hold arrangement under ASC Topic 606 will have been met. The accounting treatment of those vaccines under Release No. 33-10403 is consistent with prior SEC guidance. Until a registrant adopts ASC Topic 606, it should continue to refer to prior SEC guidance.

For questions related to the matters discussed above, please contact us.

[1] Revenues representing operating-differential subsidies under the Merchant Marine Act of 1936, as amended. Operating-differential subsidy is a payment made by the federal government to the owner-operator of a qualified American flag vessel to cover certain costs.