16.2 Disclosure Elections

The Background Information and Basis for Conclusions of ASU 2014-09 explains that one of the goals of ASC 606 is to improve the revenue disclosure guidance under U.S. GAAP. As a result of the disclosure requirements in ASC 606 (which are discussed in detail in Chapter 15), financial statement users will have better information to help them make financial decisions. However, when the FASB was developing the revenue standard, it received feedback from nonpublic entities related to (1) the increased costs that nonpublic entities would incur to meet the expanded disclosure requirements and (2) questions about why nonpublic entities should be required to provide the same level of disclosure as public entities given that users of nonpublic-entity financial statements, typically debt holders, have greater access to management. The FASB considered the costs and benefits of its disclosure package and decided to provide various relief to nonpublic entities.

The table below summarizes the disclosures that a nonpublic entity may elect not to apply (the ASU’s disclosure requirements are covered in Chapter 15 as well as in the left column below).

Disclosure Requirement	Election for Nonpublic Entities
Present or disclose revenue and any impairment losses recognized separately from other sources of revenue or impairment losses from other contracts. (ASC 606-10-50-4; see Section 15.2)	None.
A disaggregation of revenue to “depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors” (the ASU also provides implementation guidance). (ASC 606-10-50-5 and 50-6; see Section 15.2.2)	An entity may elect not to provide the quantitative disclosure but should, at a minimum, provide revenue disaggregated according to the timing of transfer of goods or services (e.g., goods transferred at a point in time and services transferred over time). (ASC 606-10-50-7; see Section 15.2.2)
Information about (1) contract assets and contract liabilities (including changes in those balances) and the amount of revenue recognized in the current period that was previously recognized as a contract liability (ASC 606-10-50-8 through 50-10) and (2) the amount of revenue recognized that is related to performance obligations satisfied in prior periods (ASC 606-10-50-12A). (See Sections 15.2.3 and 15.2.4)	An entity may elect not to provide the disclosures but should disclose the opening and closing balances of receivables, contract assets, and contract liabilities (if not separately presented or disclosed). (ASC 606-10-50-11; see Section 15.2.3.3)
Information about performance obligations (e.g., types of goods or services, significant payment terms, typical timing of satisfying obligations, and other provisions). (ASC 606-10-50-12; see Section 15.2.4)	None.
Information about an entity’s transaction price allocated to the remaining performance obligations, including (in certain circumstances) the “aggregate amount of the transaction price allocated to the [remaining] performance obligations” and when the entity expects to recognize that amount as revenue. (ASC 606-10-50-13 through 50-15; see Section 15.2.4.3)	An entity may elect not to provide these disclosures. (ASC 606-10-50-16; see Section 15.2.4.3)
A description of the significant judgments, and changes in those judgments, that affect the amount and timing of revenue recognition (including information about the timing of satisfaction of performance obligations, the determination of the transaction price, and the allocation of the transaction price to performance obligations). (ASC 606-10-50-17 through 50-20; see Sections 15.3 through 15.3.2)	In accordance with ASC 606-10-50-21, an entity may elect not to provide any or all of the following disclosures: An explanation of why the methods used to recognize revenue provide a faithful depiction of the transfer of goods or services to the customer. For performance obligations satisfied at a point in time, the significant judgments used in evaluating when a customer obtains control. The methods, inputs, and assumptions used to determine the transaction price, except that an entity must disclose the methods, inputs, and assumptions used to assess whether an estimate of variable consideration is constrained. (ASC 606-10-50-21; see Section 15.3.2)
Information about an entity’s accounting for costs of obtaining or fulfilling a contract (including account balances, judgments, amortization methods and amounts, and impairment losses). (ASC 340-40-50-2 and 50-3; see Section 15.4)	An entity may elect not to provide these disclosures. (ASC 340-40-50-4; see Section 15.4)
Information about the entity’s policy decisions (i.e., when the entity used the practical expedients allowed by the ASU). (ASC 606-10-50-14 through 50-16, ASC 606-10-50-22, and ASC 340-40-50-5; see Sections 6.4.1, 15.2.4.3.1, and 15.5)	An entity may elect not to provide these disclosures. (ASC 606-10-50-14 through 50-16, ASC 606-10-50-23, and ASC 340-40-50-6; see Sections 15.2.4.3.1 and 15.5). However, private-company franchisors that elect to use the practical expedient and policy election in ASC 952-606-25-2 and 25-3 must disclose those elections (ASC 952-606-50-1 and 50-2; see Section 5.3.5).

Connecting the Dots

Interim reporting requirements, including those related to disclosure, are outlined in ASC 270. In particular, public entities are required to disclose, at a minimum, the financial information required under ASC 270-10-50-1. Revenue disclosures are specifically addressed in ASC 270-10-50-1(a), which requires the disclosure of “[s]ales or gross revenues, provision for income taxes, net income, and comprehensive income.” Section B of ASU 2014-09, Conforming Amendments to Other Topics and Subtopics in the Codification and Status Tables, expands this interim reporting requirement by adding the following guidance:

50-1A Consistent with paragraph 270-10-50-1, 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 Securities and Exchange Commission, shall disclose all of the following information about revenue from contracts with customers consistent with the guidance in Topic 606:

A disaggregation of revenue for the period, see paragraphs 606-10-50-5 through 50-6 and paragraphs 606-10-55-89 through 55-91.
The opening and closing balances of receivables, contract assets, and contract liabilities from contracts with customers (if not otherwise separately presented or disclosed), see paragraph 606-10-50-8(a).
Revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period, see paragraph 606-10-50-8(b).
Revenue recognized in the reporting period from performance obligations satisfied (or partially satisfied) in previous periods (for example, changes in transaction price), see paragraph 606-10-50-12A.
Information about the entity’s remaining performance obligations as of the end of the reporting period, see paragraphs 606-10-50-13 through 50-15.

Many nonpublic entities are not subject to interim financial reporting requirements and therefore would not be required to comply with the interim disclosure requirements in ASC 270. In addition, the same entities that are determined to be nonpublic for purposes of applying ASC 606 are outside the scope of the requirements in ASC 270-10-50-1A. As a result, even if a nonpublic entity produces interim financial information, it is not required to provide the disclosures outlined above that are required to be presented for public entities.

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.