Ford and Alphabet have received SEC comments on their initial disclosures under FASB’s new revenue recognition standard. Both required more than one round to clear.

Ford

Initial comments received by Ford were:

— In the penultimate paragraph on page 6, you state under the new revenue standard that for certain vehicle sales where revenue was previously deferred, such as vehicles subject to a guaranteed resale value recognized as a lease and transactions in which a Ford-owned entity delivered vehicles, revenue is now recognized when vehicles are shipped. Please explain to us in greater detail the nature and terms of such contracts and provide us with the basis for your accounting conclusions under ASC 606 and under legacy US GAAP. As part of your response, please tell us how contracts with vehicle sales subject to a guaranteed resale value differ from transactions with guaranteed repurchase obligations which continue to be accounted for as operating leases under ASC 606 (page 11).

— We note your presentation of disaggregated revenue by major source on page 10. With respect to the disclosure requirements of ASC 606-10-50-5, please tell us how you considered the guidance in paragraphs ASC 606-10-55-89 through 55-91 in selecting the appropriate categories to use to disaggregate revenue.

— You present “vehicles, parts, and accessories” as a major source of revenue. Please explain to us why the aggregation of revenue from “parts and accessories” with revenue from “vehicles” is appropriate pursuant to ASC 606-10-50-5. We note from your disclosures that parts and accessories appear to be subject to return from customers, whereas this does not appear to be the case for vehicles. It also appears these categories may have other different characteristics, such as type of good, pricing and dollar magnitude of contribution to margins.

— Please tell us how you considered and complied with the disclosures requirement outlined in ASC 606-10-50-12(b) with respect to significant payment terms.

The follow-on letter received by Ford was especially interesting, indicating the need to make sure public statements do not contradict disclosures made in the financial statements:

— We have reviewed your response to prior comment 2. We note you provide other information outside your financial statements regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from your contracts with customers, including but not limited to:

Monthly sales reports which include unit sales by brand, by vehicle type, and between retail and fleet sales. These reports also include a discussion of underlying trends for key vehicles and some information on transaction prices.

A Strategic Update given on October 3, 2017 which includes a discussion of plans to shift allocation of capital from cars to SUVs and trucks and to expand electric vehicles revenue opportunities.

An earnings call on July 26, 2017 which includes a discussion of the strong performance of commercial vehicles as well as consumers moving away from passenger cars and into utilities and trucks and your increasing investments in these areas as a result.

Given the information cited above, it appears other information about your automotive segment’s revenue (beyond geographical information) is used by the company and users of your financial statements to evaluate your financial performance or to make resource allocation decisions. In this regard, please tell us how you considered the presentation and use of such information pursuant to ASC 606-10-55-90(c) when determining the appropriate disaggregated revenue categories that depict how the nature, amount, timing and uncertainty of cash flows are affected by economic factors and in the context of meeting the overall disclosure objective of ASC 606-10-50-1.

Alphabet

The initial Alphabet comment letter can be found here, and the follow-on comment letter can be found here.

The initial comments received were:

–We note that you generally report revenue from ads placed on Google Network Members’ properties on a gross basis. Please help us understand, and revise future filings as appropriate, if there are any circumstances in which you report revenue on a gross basis but you do not have the sole ability to monetize the advertising inventory. If such situations exist, please provide us with a specific and comprehensive discussion of how you determined that you are the principal in these arrangements. Reference ASC 606-10- 55-36 through 55-40.

— Please provide us your analysis of principal versus agent considerations for digital content if revenue recognized is material. In this regard, tell us if revenue from sales of books, movies, music and other items made through Google Play is recognized on a gross or net basis. Reference ASC 606-10-55-36 through 55-40. In addition, to the extent that revenue recognized is material, please provide the disclosures required by ASC 606-10- 50-12(c) as applicable.

— With a view towards future disclosure, please tell us how you determined when to recognize revenue for items included within Other Revenues. Reference ASC 606-10- 50-18 and 50-19.

— Please tell us how you selected categories to present disaggregated revenue information. In this regard, we note your products, various properties and various ways customers may purchase advertising. We also note your disclosure on page 33 regarding how your results are impacted by increases in mobile searches and growth in YouTube revenue. Please tell us why you believe your current disclosures meet the objective of depicting how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Reference ASC 606-10-50-5.

— We note that certain customers may receive cash-based incentives or credits, which are accounted for as variable consideration and estimated based on the expected amount to be provided to customers. We also note that you have certain obligations for refunds. To the extent that these amounts are material and your estimates involve significant judgments, please revise your disclosure in future filings to explain how you determine the methods, assumptions and estimates used. Reference ASC 606-10-50-20.