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ASC 606 - Clarification Needed

In the ASC 606 - a company is required to account for Time Value of Money if it is significant. Is there an amount or % defined? Additionally, it also mentioned a company is able to defer the contract acquisition costs such as sales commission in this new standard. I wonder if a company would be released of such requirement if the sales commission is paid on bookings and not when revenue is recognized or AR paid? Appreciate your thoughts on these 2 items. Thank You.

Answers

Hang Nguyen
Title: Plant Controller
Company: Sparton Corporation
(Plant Controller, Sparton Corporation) |

In my opinion, the sales commission should be calculated and accrued in associated with recognized revenue, it will be paid upon AR status as the business is not completely done until payment is received.

CFO CFO
Title: CFO
Company: CFO
(CFO, CFO) |

We would not change our commission structure to suit the accounting changes as our business model for our type of business is working in motivating sales to get the deal. Hence, I need help in getting clarification on the accounting treatment based on our business model. Thanks

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

IMHO:

If you consistently apply the same rules for accounting (commissions) AND disclose those rules to the readers/users of your Financials, then you shouldn't have a problem.

GAAP are just that, a set of principles, not laws.

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