Addressing Disclosure Information Under the New Revenue Standard

There are a lot of new disclosures required.  Some are policy and can be written/determined at any time during 2019.  Others are more pervasive and you may need to make system changes now in order to capture the information needed for your 2019 financial statements

GAAP now requires a footnote disaggregating revenues.  What does that mean?  Revenues must be disaggregated according to the timing and qualitative information about how economic factors will affect the nature, amount, timing, and uncertainty of revenue and cash flows.  You must chose the disaggregation categories that make sense to your organization.  Some common categories include:

  • Geographical regions
  • Service lines
  • Segments
  • Departments
  • Customer type
  • Contract type
  • Timing (Point in time versus over time)

The standard includes a practical expedient for private companies that allow a company to default to “timing” (point in time versus over time) to disaggregate revenues.  If you are a contractor who sells goods at a point in time, this could be an easy “disaggregation” solution for you.  Some examples include:

  • Paving contractors with asphalt plants that sell to other contractors
  • Landscaping contractors who sell materials to others
  • Clearing contractors that sell mulch or excavated materials (dirt, etc.)

There is no guidance regarding which categories of disaggregation to use.  The goal is to provide users with useful information.  You may want to speak to the users of your financial statements, especially your bonding company, to determine if there are any categories they would like to see. KatzAbosch has individuals experienced in contractor issues and trained in process improvement using lean six sigma principles that can help you through this transition.  Ready to implement? Click here to view some items you need to consider for this area.

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