15.3 Significant Judgments

The table below summarizes the disclosure requirements discussed in this section through Section 15.3.2, including the disclosures that a nonpublic entity may elect not to apply as well as required interim disclosures.

Category	Disclosure Requirements	Election Available to Nonpublic Entities	Interim Requirement (ASC 270)
Significant judgments and estimates	Qualitative information about determining the timing of: Performance obligations satisfied over time (e.g., methods of measuring progress, why methods are representative of transfer of goods or services, judgments used in the evaluation of when a customer obtains control of goods or services).	Yes13	No
	Performance obligations satisfied at a point in time — specifically, the significant judgments used in the evaluation of when a customer obtains control.	Yes	No
	Qualitative and quantitative information14 about:
	Determining the transaction price (e.g., estimating variable consideration, adjusting for the time value of money, noncash consideration).	Yes	No
	Constraining estimates of variable consideration.	No	No
	Allocating the transaction price, including estimating stand-alone selling prices and allocating discounts and variable consideration.	Yes	No
	Measuring obligations for returns, refunds, and other similar obligations.	Yes	No

An entity is required to disclose information about the judgments, and changes in judgments, it made in applying ASC 606 to help financial statement users better understand the application of its accounting policies as well as the assumptions and methods used. Questions that entities could consider in implementing the revenue standard’s disclosure requirements related to significant judgments and estimates include the following:

Are all significant judgments and estimates related to variable consideration, significant financing components, or noncash consideration included in the disclosures?
Are all significant judgments and estimates related to the determination of stand-alone selling prices included in the disclosures?
Has the entity adequately disclosed information about the methods, inputs, and assumptions used in the annual financial statements?
- What judgments does the entity make in selecting an appropriate measure of progress?
- What estimates does the entity make in determining the level of completion?
- What information does management consider to determine when performance obligations are satisfied?
Has the entity adequately described significant judgments and estimates related to (1) performance obligations satisfied at a point in time, (2) performance obligations satisfied over time, and (3) the transaction price and amounts allocated to performance obligations?

ASC 606-10

50-17 An entity shall disclose the judgments, and changes in the judgments, made in applying the guidance in this Topic that significantly affect the determination of the amount and timing of revenue from contracts with customers. In particular, an entity shall explain the judgments, and changes in the judgments, used in determining both of the following:

The timing of satisfaction of performance obligations (see paragraphs 606-10-50-18 through 50-19)
The transaction price and the amounts allocated to performance obligations (see paragraph 606-10-50-20).

The illustration below summarizes the requirements in ASC 606 related to the disclosure of significant judgments about revenue.

15.3.1 Determining the Timing of Satisfaction of Performance Obligations (i.e., the Timing of Revenue Recognition)

ASC 606-10

50-18 For performance obligations that an entity satisfies over time, an entity shall disclose both of the following:

The methods used to recognize revenue (for example, a description of the output methods or input methods used and how those methods are applied)
An explanation of why the methods used provide a faithful depiction of the transfer of goods or services.

50-19 For performance obligations satisfied at a point in time, an entity shall disclose the significant judgments made in evaluating when a customer obtains control of promised goods or services.

50-21 An entity except for a public business entity, a not-for-profit entity that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or an employee benefit plan that files or furnishes financial statements with or to the SEC, may elect not to provide any or all of the following disclosures:

Paragraph 606-10-50-18(b), which states that an entity shall disclose, for performance obligations satisfied over time, an explanation of why the methods used to recognize revenue provide a faithful depiction of the transfer of goods or services to a customer
Paragraph 606-10-50-19, which states that an entity shall disclose, for performance obligations satisfied at a point in time, the significant judgments made in evaluating when a customer obtains control of promised goods or services . . . .

15.3.2 Determining the Transaction Price and the Amounts Allocated to Performance Obligations

ASC 606-10

50-20 An entity shall disclose information about the methods, inputs, and assumptions used for all of the following:

Determining the transaction price, which includes, but is not limited to, estimating variable consideration, adjusting the consideration for the effects of the time value of money, and measuring noncash consideration
Assessing whether an estimate of variable consideration is constrained
Allocating the transaction price, including estimating standalone selling prices of promised goods or services and allocating discounts and variable consideration to a specific part of the contract (if applicable)
Measuring obligations for returns, refunds, and other similar obligations.

c. Paragraph 606-10-50-20, which states that an entity shall disclose the methods, inputs, and assumptions used to determine the transaction price and to allocate the transaction price. However, if an entity elects not to provide the disclosures in paragraph 606-10-50-20, the entity shall provide the disclosure in paragraph 606-10-50-20(b), which states that an entity shall disclose the methods, inputs, and assumptions used to assess whether an estimate of variable consideration is constrained.

Footnotes

See footnote 6.

See footnote 7.

Confidential and Proprietary — for Use Solely by Authorized Personnel

This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.