Accountants Warn of Hidden Cost-Reporting Issues in Revenue Rule

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By Steve Burkholder

Public companies should be aware of requirements in new revenue reporting rules to account for costs stemming from acquiring and fulfilling customer contracts that generate cash, accountants said May 8.

The cost-reporting provisions in the new revenue rules—ASC 606—includeprescriptions on capitalization, write-downs and assigning money values that seem to be under the radar of many companies as they get set for shifting to the new standard next year, according to panelists at a reporting revenue conference co-sponsored by Deloitte & Touche LLP and Bloomberg BNA.

Caught Off Guard

“That’s something that kind of caught us off guard,“ Paul Vigil, senior director for revenue reporting at BMC Software, Houston, said.

Vigil highlighted accounting for commissions in acquiring revenue-generating contracts.

He echoed an appraisal of Randy Rasmussen, vice president and controller at Medidata Solutions, about how difficult the reporting requirements can be as companies focus on main sections of the sweeping revenue reporting standard issued by the Financial Accounting Standards Board in 2014.

The FASB standard presents changes to how companies should report contract acquisition and fulfillment costs. Those include a requirement that a company should record as an asset the incremental costs of obtaining a contract that the enterprise expects to recover.

Rasmussen suggested he wished his company were aware earlier of those provisions on contract-related costs as it gets ready for the fast approaching effective date of the revenue standard.

To contact the reporter on this story: Steve Burkholder in Washington at sburkholder@bna.com

To contact the editor responsible for this story: S. Ali Sartipzadeh at asartipzadeh@bna.com

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