Sign Wisconsin Profit Sharing Agreement Template Fast

Document type sign profit sharing agreement template wisconsin fast

[Music] hello and thank you for joining us for today's webinar revenue recognition in the telecom world your presenters today are partner jessica richter and director eric babler jessica has 20 years of experience providing audit tax and consulting services for telecommunications companies her focus includes financial reporting and auditing financial projections and forecasts cost allocations revenue assurance cost separation accounting loan applications bookkeeper training business consulting and employee training jessica obtained her certified information technology professional accreditation in 2008 and in 2015 she obtained her certified information systems auditor certification she was also named the ica new committee person of the year in 2019. eric has served as the engagement manager for audit tax and consulting services for telecommunications companies including local exchange care carriers and wireless and cable television entities he is a member of the american institute of cpas and wisconsin institute of cpas and now i'll hand it over to eric hello thank you for uh joining us today on our discussion of revenue recognition in the telecom world uh today we are today we will refresh our understanding of ase 606 you know usually we'll call it revenue recognition topic 606 or asc 606 we'll learn and understand the effects of implementation of 606 on the telecom entities and we'll discuss the potential future effects on operations of telecoms so this graphic compares the current which we'll call legacy guidance or 605 guidance to the new 606 guidance this is a visual visualization of how ase 606 consolidates various industry specific guidance into one model the new model's core principle is that revenue should be recognized when promised goods or services are transferred to customers in an amount that reflects the consideration in which the entity to be entitled in exchange for those goods or services the transfer to customers occurs when or as the customer obtains control of the asset this can be at a point in time or overtime so we'll jump right into polling question one have you implemented asc 606 yet please select one yes no not required because we are other than a 12 31 year end no we took advantage of the latest delay or not sure so not surprising here that most of you probably have taken it or are looking to do it or taking advantage of the latest delay so 606 applies to all contracts with customers except various other ones such as lease contracts insurance contracts financial instruments product warranties and non-monetary exchanges 606 created a framework for revenue recognition uh this accounting framework consists of five steps to analyze contracts with customers uh step one identify contracts with customers step two identify the performance obligations step three is determining the transaction price step four is allocating the transaction price to performance obligations and step five is recognize revenue when or as performance obligations are satisfied uh step two identifying performance obligations is probably one of the more important ones of this five-step model generally any agreement with a customer that creates legally enforceable rights and obligations meets the definition of a contract as such a contract can be written it can be oral or it can just be implied by the nature of the agreement so we're going to go through each step in a little more detail step one identify contracts with customers you know contract is an agreement between two or more parties that creates enforceable rights and obligations and as we said it can be a written oral or implied commercial substance is defined as the expectation that the entity's future cash flows will change as a result of that contract i.e receiving monetary cash things along those lines approval by all parties you know in um basically customary to the business practices of the entity uh commitment by all parties to perform their obligations under the contract and also has to be identifiable rights and obligations and payment terms for each party to the contract there's also a collectibility component basically it has to be probable that the entity will collect the consideration in which it will be entitled in exchange for the goods or services that will be transferred to the customer you know a contract wouldn't exist if each party has a unilateral right to terminate a wholly unperformed contract without compensation a customer is a party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities so step two identify performance obligations as we said this is probably one of the more important ones basically delivery of goods or performance of service services is an indicator that control over contractually promised goods or services has transferred to the customer and that revenue may be recognized delivery or performance may occur at a point in time or overtime indicators of the transfer of control include but aren't limited to right of payment passage of legal title physical possession significant risk and rewards on the part of the customer and then customer acceptance of the good goods or services step three is to determine the actual transaction price of the contract so a transaction price equals the amount of consideration an entity expects to be entitled to after the collectibility threshold is met the transaction price to determine the transaction price an entity would consider the terms of the contract its customary business practices and the effects of all of the following you know the time value of money the promised amount of consideration is adjusted to reflect the time value of money if the contract has a significant financing component under a practical expedient entities are allowed to disregard the time value of money if the period between the transfer of goods or services and the payment is less than one year non-cash consideration non-cash consideration of the promise of non-cash consideration would be measured at fair value this is consistent with current u.s gaap consideration payable to the customer would be accounted for as a reduction of the transaction price unless it's for a distinct good or service this is also consistent with uscap so step four is to allocate the transaction price to separate performance obligations um we would allocate the transaction price would be allocated to the separate performance obligations identified in step two based on the relative on their relative standalone selling price uh the best evidence of standalone selling price would be observable prices for which the entity sells the goods or services separately uh for telecom it would be you know prices published on the website um you know would be the best price available in the absence of separate observable prices the standalone selling price could be estimated using several approaches including the adjusted market assessment cost plus margin or a residual value approach step five then is finally we're able to recognize revenue when these performance obligations are satisfied so revenue is recognized when control of the underlying good or services is transferred to the customer for some industries uh like real estate this is a significant departure from current uh risk and rewards criteria transfer of good transfer of control to the customer occurs when the customer has the ability to direct the use of and receive the benefits from the transferred good or service revenue can be recognized over time or at a point in time depending on how the performance obligations are satisfied if performance obligations are satisfied over time the entity would rather would recognize revenue by measuring progress towards satisfying the performance obligation in a matter manner that best depicts the transfer of goods or services to the customer the standard allows the use of both input and output methods to measure progress so companies have had two methods to implement and report on 606 as we saw about 40 eight percent of you have already implemented it and i would imagine this first method you guys did not do which is the full retrospective method which basically is a restatement of the years to report the new guidance most of you probably have done the modified retrospective method which prior years are not restated but any adjustment to prior years that would have been reported are adjusted to retained earnings so as i said the majority of you and i would imagine the ones that haven't uh implemented 606 will choose the modified retrospective method as it is generally easier to account for the changes related to the standard so right now i'll turn it over to jessica to discuss the effects of implementation all right thanks eric so a lot of stuff to take in there with the kind of refresher on 606 it was a pretty interesting standard to work through lots of things to consider so now we're going to talk about really some of the effects of implementation that we saw and all the clients that we helped through the transition so one of the things we did is we looked at the public companies because they had to adopt a year earlier than private industry did and so um here are some stats from tds and us cellular and looking at what kind of cumulative adjustment to retained earnings they had to make so for day one when they adopted the standard as of the first of the fiscal year in which it was adopted there may have been multiple contracts in play at that point in time which had a change in how the revenue was being recognized and as a result it required them to make some kind of adjustment through retained earnings because the timing of that revenue recognition actually changed and so you can see um tds and us cellular both had you know in excess of 150 million dollar adjustment to retained earnings that adjustment as a percent of their operating revenue was anywhere from three to four percent there um and those are obviously going to be heavily skewed because of the wireless side of that um we saw we're going to talk about a little bit more some more impacts in the wireless industry non-wireless related had some effect but as you can see it was only about a percent of total operating revenue so less impact as far as timing goes but there's some other things that happened along the way that had some impact as well so when we look at our ilex select broadband which would include wired and wireless so fixed wireless internet broadband providers as well as video providers a lot of the impacts really resulted in the f way of moving around of the income on the line items in the financials so instead of being in internet some dollars may be shifted to the access services or to local service or to video or vice versa and so much of this really had to do with bundled discounts so where you encourage your customers to take multiple services and you possibly offer them a five dollar discount or ten dollar discount um something of that nature we're gonna go into some specific examples and show really how that impacted things we had very very few people had that retained earnings adjustment um in this space of the telecom world a few of them had some things where they were offering some certain discounts um that had to be allocated over the contract term because they actually had the customer sign maybe a two-year agreement um and so we did have a few impacted by those types of things and we're also going to go through some examples so you can see what that looked like on the cellular side um the impacts were large as indicated by that first slide we looked at frequently there was a large retained earnings adjustment and it really had to do with timing of revenue and expense recognition um even in non-telecom clients i work with i taught this is the perfect example of why revenue recognition um mattered i guess in the old days you would go and sign up for your cellular contract and you would get a free phone when you signed up for your service and then you'd sign a two-year agreement and if you broke your agreement early you'd have to pay like a two or three hundred dollar disconnect fee well really what that fee was doing was recovering the cost of the phone that was buried within your monthly fee that you were paying for service so previously there was no revenue ever recognized for the phone and the revenue was actually being recognized as service revenue but there was this huge cost of goods sold because the phone was sold to the customer so therefore expensed but really what's happening as a portion of that monthly revenue from the customer was really to help recover the cost of the phone so it's really phone revenue and so now what it's the standard says in those types of situations is we need to look at how much would be collected from the customer over the contract so what is the total contract price and then we would have to look at if we sold that phone on its own how much would it cost the customer and how much would the plan cost if it didn't have a phone attached to it that would represent the standalone selling price obviously phones are expensive and so when you looked at that that meant we would actually have to lift dollars out of that monthly service revenue recognize it right away day one as part of the phone sale and then the monthly service revenue was actually less that's the classic example of what revenue recognition does is helps look at i have satisfied my obligation to provide that cellular phone to the customer and they've walked out the door with it so therefore i should recognize the revenue associated with the phone at that point in time because that's when i satisfy my obligation on a go forward i have to provide monthly service so then i get to recognize the service monthly as i perform over time for providing that customer access service to basically have dial tone on their cell phone or data or whatever it is that they choose to use so that's really the big one that occurred um some of the device financing accounting actually replicates what 606 wants you to do so some companies didn't have as large of impact because they were already doing a ton of device financing um and so a lot of that was already kind of being taken care of the right way but there was still a lot of old plans out there where there was free discounted phones and even in the device financing world there's still some discounts being given that have to be looked at and potentially still go through a similar exercise one of the other things that came into play was commission expense um the standard says that that's the cost of obtaining obtaining a contract and so as a result of that you should recognize that expense over the length of the contract not when you pay your employee the commission so that also just resulted in some changes as well so a lot of different things to consider there and we're going to look at some actual examples with some numbers so you can kind of see what that looks like so i mentioned the allocation of discounts we also had situations where there were upfront payments made by customers so potentially installation fees activation charges um depending on maybe a circuit agreement where they paid so much upfront and then paid a lesser fee on a monthly basis on a go forward if you're in a non-regulated space we've not talked about those commissions and then there's actually some impacts to even directory revenue and expense so on the allocation of the discounts as eric mentioned when you're looking at the transaction price and then figuring out what the revenue to recognize is and the allocation of that the standalone selling prices um at the sum of the standalone selling prices of the bundled services is more than what you're actually getting or what exp what you're expected to get from the customer then you should allocate that discount proportionally to all performance obligations in the contract at one point we had some discussion if the local service rate should be included in that because generally that was there was a rate floor but obviously the rate floor went away um even if the rate floor hadn't gone away the way the guidance is written we you still have to do an allocation of the discount even to the local to the lo al service rate um so that needs to be included as well so our next polling question that we'll get into before we look at some numbers is does your company have bundles with discounts yes but very minimal yes no or not sure i will see through the process of working with all our clients i'd say it was pretty evenly split between the yes minimal yes and no some companies had what appeared to be bundles but really what it was it was just all the standalone selling prices and it was marketed as a bundle but there wasn't actually any discount or difference if the customer took one or three services um so then it really there wasn't any issue because the standalone and the contract price were the same um we had some others where we had a few bundles but it was pretty straightforward i had one client that with all their different services that they offered they had 152 bundles that we had to analyze for allocation of discount between standalone selling prices and contract prices um so can get pretty intense and so about what i expected uh kind of a third and a third and then yes but and we're else not sure so kind of what i expected um and i would say pretty reflective of the clients that we helped so we'll move on from there so the guidance does state that if there's evidence that the entire discount relates to only one or more but not all of the performance obligations then the discount is not allocated proportionately to all performance obligations in the contract so if you think internet video local service um and say there's a 10 discount if you can prove that the only time they can get the discount is if they take one certain service and not necessarily others then there's a potential to allocate that discount only against the revenue for that one service it's a pretty tough hurdle to get over um i only had i think one client that accomplished that everyone else we couldn't get there um so it was a pretty tough sell to get across that like i said i had one where we got there but that was the only one so of about 30 or so companies i personally worked with um that had that and i know others were in the same boat they just just didn't see it happening very often so here's how to show you an example so what the issue is is as we all know internet tends to be a really great fantastic high margin service which is great it looks you know when you say look at the revenues look at the direct expenses there's a lot of margin there so hence great place to vary a discount because you don't see it as impactful when you're looking at just that service um so what people would often do is say on the left here we have our standalone selling prices um for local service long distance internet long distance internet video and then the set top box so all together that was approximately 205 they would give them a 15 discount if they took um three services in this case as our example and then previously they would just put the discount against the internet service and leave everything else alone not correct though um so what we actually need to do is we need to proportionately on a pro rata basis allocate that 15 to each of our different services based upon that standalone selling price so that we get the ended ending actual selling price after allocating that discount in or taking that 15 off so as you can see we took a dollar 32 out of local service 80 cents out of our long distance instead of 15 from internet it was only five dollars and 12 cents and then our video between the set top box and the video service itself was about just a little bit less than eight dollars whereas previously that wasn't hit at all so you can see that most um financial statements show you know local service access service long distance internet and video as your kind of line items for your revenues well if you have a thousand customers per month that need to see this change affected to their bundle you can see now dollars start to move around um they're all still there they just show up in different places than they did before and that was the most significant thing that we saw through the revenue recognition implementation projects that we did with all our clients in the various telecom space especially those that offer um you know triple play basically type services so what are some of the other effects well reimagining the bundle deciding is this really how we want to do our services is this how we want to do our pricing do we want to have so many bundles like i said i had one client that had over 150 bundles that we had to analyze and look at to see if the accounting was being done correctly and we found some things quite a few things had to be moved around consolidating bundles let's condense this down let's come up with a slicker way more simple more straightforward one that cleans up all your usp codes your use codes and your systems right so you don't have so many things in there billing never gets mad if you reduce versus ad so that's always a good thing too and some companies actually said you know what i'm done with bundles i don't want to mess around with this we'll market it as a bundle to the customer but really all it is is adding together the standard regular standalone selling prices and there's really not a discount involved but marketed as a bundle of services it has that appeal to the customer so something else we talked about and saw was upfront payments made by customers so things like activations and installations so lots of contracts have some kind of non-refundable upfront fee whether it's an installation charge or an activation fee um that happened at the beginning i also mentioned sometimes what i saw some circuit contracts again non-regulated where maybe there was an upfront fee or portion paid and then there were then there's a monthly ongoing fee after that so those are all different things you kind of have to assess and so determining whether that be represents a separate transfer of goods or services to the customer or is it really so interrelated or would never have been incurred had they not taken the other service that it's really together and so it's part of the same contract some of the times and most of the times these are more administrative type fees like the activation charge that's simply the charge to pay you know to get them set up in the system so you're not definitely in that case transferring a separate bitter service and so um it's definitely part of the contract um also any activities that improve the telecom you know your network do not transfer a good or service to the customer either so some kind of upgrade charge something of that nature you know or an installation fee to upgrade service generally that's not going to be a separate good or service transferred it's just a change and so that would be part of the contract as well so how do we what do we need to do what are the effects well probably have to recognize that installation fee over time which would be the life of the contract um so you'd have a deferred revenue on your so a liability that you would have and then you would recognize that over the life of the contract now if it's less than 12 months generally you can just record it right away um because it's within that 12 month period also for most companies these are small charges um and so a lot of the times they're probably immaterial to the financial statements and so you can say you know go through the analysis look at what the potential impact could be but could decide yeah this is pretty immaterial we don't collect a lot of this and so um plus there may be a truck roll involved so then there is you know expense associated when we do that um so that's what we saw for most everybody is that it was pretty minimal pretty immaterial and we didn't really have to mess with it too much um that wasn't the case across the board though so i had one client actually i had a few clients but i had one client where this was pretty significant um they were working in a new area deploying a lot of customers running promotions trying to get customers signed up and so um they had where they were waiving installation fees of a customer signed a two-year agreement so that is um a concession to the customer so what we have here or cost of obtaining the contract so here's our normal 69.95 monthly fee that the customer would pay for service here's their contract term so here's how much revenue we normally would have recognized each year of that contract to come out to our total so previously we would have just never recorded the installation fee and we just would have recorded this revenue and away we go instead what we need and the discount may have been recognized right away so what we need to do now is we actually need to reduce um because we're not going to collect that 150 from the customer for the installation fee we need to actually reduce the monthly or the yearly revenue from the customer for that discount fee that was given to them or that concession that was given to the customer and so we actually have then a monthly reduction which here's the yearly amounts is how that worked out to so that that's recognized over the contract with the customer this is a little snippet example and obviously you can look at this and say well that's not a lot of dollars but if you're doing a large expansion project and you have a lot of new signups this can get very large very quickly so we um saw that in a few different cases um some companies that i worked with that did that and so it it resulted in a shift um and so we had some shift in timing of current versus future revenue and so now here's the revised annual revenue that we would recognize from those contracts because we had to put that discount into it for that upfront fee that was waived we also have to look at commissions paid to employees um the issue is that the companies probably may pay a commission to personnel for new customer signups and that commissions do meet the criteria for recognition as an asset as a cost to obtain the contract so what does that mean well that means that they're going to actually instead of immediately expensing that cost you would recognize it as what's called a contract asset kind of like a prepaid or deferred charge on the balance sheet and then you would expense it over the life of the contract with the customer the tricky part there though is not every contract with the customer has a specified term a lot of companies have done away with say the two-year agreement or one-year agreement and you might say well it's just month month so i can expense it right away and the standard says not so fast you actually need to go through and determine what the average life of your customer is and then use that average to determine how you would allocate that sales commission so we didn't have a lot of companies that ran into this mostly because a lot of companies just don't pay commissions or what they do is very very small and so there's just not a significant or material impact to the financials um but we definitely had some that had that and so again changing the timing of the recognition of the expense and spreading it out over the life of the contract so less expense in the first year when you normally would have seen that expense and then taking it over time now this of course will get tricky for a couple of years right while you're in transition of some of that accounting because now your comparability of expenses is not quite the same and you have to do a different kind of analysis than just the income statement to look at what is it costing us if you want to look from a cash perspective on commissions that you're paying to your employees because obviously they get paid right away generally but the expense is recognized over time so those are some of the things that have to be thought through when you're looking year-to-year comparisons as we move forward in the next year of the standard some things that are going to be different so here's an example with some numbers showing you commissions paid to employees for various contracts and various different commission amounts so basically what it is is it looks and says okay well here's the total contract period here's the total commission that was paid to the employee and the total days of the contract and then i just did a simple basic math calculation to figure out the days in each year and then allocate the five thousand dollars over the total days of the contract within each year so then you can see over here we've recognized the total amount of the entire commission so a big difference in year one had we done this the old way we would have recognized twenty two thousand five hundred dollars of commission expense instead now we're only going to recognize 3582 approximately and then gradually so forth and so on over the next several years until we get out to 1231 2026 where we've ended all the contracts i happen to be showing in this example and have finally recognized the entire twenty two thousand five hundred dollars so again you can see some impacts of this change not everybody had this but we definitely saw it in certain circumstances some of the middle mile companies that operated middle mile operations had more of this kind of stuff than maybe your traditional ilec or c lag had those are just a few of the examples um there are other instances of revenue expense where there definitely was some timing the standard basically indicates that it should be recognized on a systematic basis again like eric said consistent with the pattern of the transfer of the service um over the length of the contract and so the revenue side generally is pretty straightforward when you're looking at what's the length of the contract and when should we recognize the the trickier part is the expense side of it and that's often times where we may not know um the specific length of the contract to allocate that expense so if there isn't a contract that's in writing that specifically indicates a term then we like i said before we're going to use that judgment um customer churn is a good number i know not everybody calculates that but a lot of people do um that can be a good way however what we did find is that you know some companies have had customers for just almost their whole life um very loyal dedicated customers in your communities um that you serve and you may be their only option so that's why they've been with you for so long so churn isn't necessarily the best either so that's where in some of those cases we went back to some of the stats um from some of the larger companies um hang on before i go to the polling question and i'll show you i've got a slide that goes through that and we'll show you some of the larger company stats and so we use some of those um as a guide for coming up with circumstances where we needed some kind of term to do that and i'll explain a little bit more about that when we go through that example so now we'll get to that next polling question did you see revenues move around on your income statement if you've not yet adopted do you think that you will yes no maybe or not sure i would say of all the companies that i personally worked with that had to do the adoption of the standard i would say probably 80 percent of them saw dollars move um and 20 didn't um so i think that's probably uh pretty standard with what we saw as a firm as a whole with all the companies that we work with um but definitely some impacts there so about 37 of you said yes 16 no 14 maybe and 33 not sure so kind of about what i thought it would be um definitely a lot to go on the bundle discount is the thing that got everybody um where we saw all the driving change behind the movement of the dollars so definitely an impact there all right so here's the slide i was mentioning where we looked at some of the publicly available information and looked at what were their contract customer terms where maybe there wasn't a specifically stated contract term and so what were they using as customer life in those circumstances so we were able to pull mediacom centraling tds frontier and charter eric was actually i think the guy that went and dug up all this information for us actually to use and so you can see everything anywhere from two to maybe ix or seven years tds had up to 60 months in some cases that they used mediacom for business had longer life versus residential and if you think about it oftentimes what we considered as part of our measure or process was well how long would you retain that customer before they thought it was worth it to spend the money to go pay another installation fee to get a different provider and usually within a year someone's not going to want to go spend 150 installation fee for instance they might want to wait longer and so then that can kind of give you a gauge as well um as far as what that customer life or average life of that customer might be um obviously there's always cases that'll say i don't care and i'll do it quicker but there's also cases for longer so hence average so that's why you go with that we also have directory revenue and expense so um the issue is that the company should record revenue expense when the physical directory is actually published so a lot of companies previously were recording that over time rather than when the physical directory actually hit the front step basically and was given to the customer made available to the customer if you have a digital or an online directory because that is provided over time because it can be accessed all the time and change all the time then you would continue recognizing that monthly for instance because of the overtime element whereas a physical directory once you hand them the physical book or make it available to them to take you have satisfied your obligation and therefore the revenue should be recognized as well as the expense the one thing that can change a little bit then is affecting of course the monthly and quarterly reporting obligations when you have gap financials so maybe some of your rus reporting or other lender reporting that may be required this usually isn't a big material item for most companies so we didn't see a ton of big impact from this but definitely something that at least needs to be considered um i can't tell you how many times i said the words well we at least have to take a look and see and then we might be able to say we're good it's immaterial we're fine um but it's just like most things when especially in the adoption of a new standard um you can't just ignore it you have to at least consider it and then document or explain why we're not taking it further so that's that's a phrase i said a lot um over the last probably six months as we were helping everyone work through the standard so at this point i'm going to turn it back over to eric and he's going to talk a little bit about some future considerations as we move forward thanks jessica so for those of you that have implemented the standard already and those that haven't here are some future considerations i will need to make 606 is an ongoing effort unfortunately it is not an implemented and forget it standard as we saw some entities we'll have to consider the recent effective date update uh provided by the fasbi uh the standard is going to require more collaboration within the organization including ongoing evaluation of operations of the organization and it also require possibly more consultations with consultants so during june of this year uh in response to disruptions uh to businesses and capital markets uh due to covid um the fasbee issued asu 2020-5 uh basically this asu created a delay of one year for private companies and not-for-profit entities an implementation of 606 if they have not issued or made available for issuance uh their financial statement so the key there is not issued or made available for issuance you may be able to apply this to your operations however for any not-for-profits the asu delaying implementation of 606 does not affect asu 18-8 not-for-profit entities clarifying the scope and accounting for contributions received and contributions made also entities are not required to delay implementation of 606. as we know the update to leasing which is asu 842 is coming up right around the corner and it may make sense to implement 606 before then uh so we encourage adopting 606 early for those that have not yet adopted the standard i could be fairly uh burdensome to um implement 606 in conjunction with 842 depending on the entity and everything with all the stuff that goes into it so there's definitely some considerations to be made there so we'll go to pulling question number four what is or was your biggest challenge in implementing asc 606 it's a complex standard and hard to understand determining the standalone selling prices identifying performance obligations we didn't find it a challenge or we're unsure so if you didn't find it a challenge let us know we'd be interested to hear from you yeah i couldn't agree more eric if they didn't find a challenge of course maybe they they had a lot of help from their auditors so that's true so pretty much what we probably would have expected uh 30 percent uh that it's complex that's very true and then identifying the performance obligations as we said from the beginning that's probably one of the more important um steps within the five-step process especially with telecom with different types of services and things like that so moving on as we said earlier 606 is going to require a collaborative effort on the part of the organizations moving forward uh management should work closely with the accounting department to champion to champion the accounting department's efforts related to accounting for the standard and reporting of the standard uh ongoing reporting requirements will require departments that within the organization that historically have not collaborated much on accounting to spend more time together such as the marketing department identifying and notifying and assisting with the analysis of new services or product offerings or other changes related to the services or wanting to add new bundles or taking away the bundles that will have an ongoing effect with the accounting of 606. the plant department's going to have to work with the accounting department more to accept help the accounting department assess activation and insult charges and basically understanding what the plant personnel are performing in the field as it relates to customers because as jessica talked about there could be some accounting related issues uh related to that and then hr um typically has probably worked closely with um the accounting department just the nature of payroll and things like that but you know if the entity is looking to include commissions uh for employees or take away commissions that commission structure could um have a an effect on the accounting for 606. so as noted before the standard is not an implement implemented and forget it you know changes in price or discount anytime there's a change in price or a change in discount throughout the year those will need to be evaluated due to the potential uh change in how any discounts uh would be allocate allocated to the performance obligations or if new services or products are added how will those affect any discount allocations and could those be additional performance obligations that would need to be calculated into um along with the discount so along with that um you know changes in activation and installation charges um depending on the nature of working with plant personnel um those could change uh the allocation of discounts if their performance obligations or not and we may have to amortize those charges depending on the nature of what the plant personnel are doing again commissions for employees would require additional accounting for those and then finally with directory revenue and expenses as jessica said not many companies it was not a very material effect but we did have some that it was an effect for um and so changing the publication date or the big thing would be switching from a physical directory to a digital directory could would change the accounting treatment of those revenues and expenses and we foresee you know going forward that digital directories probably will become more prevalent going forward less expense related to that and more real-time updating um finally two um conversations with with consultants um you know when you're making big changes to the things we discussed you know talking with external your external accounting for uh firm uh to have a complete understanding of what the accounting is required for any changes that are made and the reporting requirements uh what could be effect on any loan covenants and then the main thing is don't let the accounting for a decision uh drive the actual decision just because the accounting is hard you don't want to do a decision you know you don't want to write off the decision if it's good for the company so you definitely want to have discussions about that and then also cost consultants you want to understand talk with them for any changes in timing of revenue and specs in expense recognition and to understand any new assets or liabilities on the balance sheet you'll want to talk with them so they understand what's going on with that with the changes related to 606. so to summarize you know compliance with 606 is going to be an ongoing and potentially complex process which is going to require uh collaboration within the organization uh documentation supporting the conclusions that the entity is reached related to the five step model related to discounts is going to be an ongoing thing especially with updates to you know any bundles or things like that and then you're going to want to have continuous communication uh with various stakeholders with within the organization such as the board of directors owners uh lenders and then also you know regulators uh and consultants is there anything you'd like to add jessica no i think you covered it pretty well eric um i think at this point then we will shift to some questions all right as mentioned we are going to open the session for questions at this time to ask a question click on the question tab on your go to webinar toolbar if your question does go unanswered our presenters will follow up with you via email jessica all right thank you um eric i'm going to put you on the spot right away and i'll play backup um i think you've got this one though so for directory revenues we have a question that says if we have both a physical and a digital directory how would we record the revenue well you would have basically two separate piece parts effectively uh the physical directory you would account for under um 606 basically as a point in time revenue where you would record it record the revenue and expenses when it's published and then the digital directory would be accounted for over time which is consistent with what um you've been doing now with the physical directory or what you have been doing with the physical directory so there really wouldn't be a change with the digital but there would be a change with the physical directory so i'm going to add a layer to this because i think this is maybe the underlying question is that they receive revenues that cover both the digital and the um physical directory so then how would they choose to allocate that my guess is that's probably the underlying question there so i'll take the i'll take that you're just gonna have to come up with what you believe is a systematic way that would support what would be the standalone selling price so we can kind of go back to that methodology is that if someone were to purchase um related to the online format only what would that cost and if they would do the physical publish directory what would that cost and those become your standalone selling prices and then if your contract price is a certain fee then you would use those standalone selling prices to allocate the contract price that covers both and then from there you would move into the timing of the recognition based upon the um good that was provided i'm hungry don't see we'll give you a couple more minutes to ask some questions i don't see that we've got any come in yet um you know i would say that this was a lot of work from a documentation standpoint to go through the standard um the information once we got rolling eric help me with numbers how many i would say how many telecommunications companies did we help implement 150 200 probably yeah probably north of that um that bkd worked with um as far as implementing the standard and um you know we still have clients coming that have a non-traditional year-end so not 1231 basically so um you know we we got pretty good coming up with a good methodology eric was one of actually the drivers behind that to help really get us all going on the same page but um there's still a lot of nuances a lot of nuances with each organization even though we had a pretty good systematic approach we really still had to do a lot of okay well specific to this company here's their facts and circumstances and we maybe had a slightly different answer to something than we did with a different company on the who on the exterior look to be very similar but turned out there's actually enough differences we have to do something a little differently right yeah and two you know as the question related to directory revenue um shown that the standard is really gone to more judgment base compared to rule based so that's where document documentation is key is documenting your conclusions related to the judgments that you've made because there aren't rules that you can just say well there's the rule and that's what we did and we followed that rule you know the standards really relying on your judgment and going forward that's what the fasbee's kind of going to you can see that in uh leasing with 842 and things like that so uh that's not going that's not going away i guess and to the point of when you're for your very first slide that showed there used to be about what is it eight different guides about how to recognize revenue depending on what industry you're in and they said you know what this is kind of silly let's just have one rule book for how to recognize revenue and it doesn't matter what industry that you sit in this is how it's done so that's why there's a little bit more judgment involved um they did write a separate chapter for telecommunications it's chapter 13 in the aicpa's guide um and oh eric help me remember it's like 600 some pages or something ridiculous quite well i was in and out of that thing so much um but there's some great examples and some things in it but i know eric and i both lived in that document over the last six months uh eight months probably closer to as we were working through the standard a lot of good stuff in there but still you're not going to find an example for everything and so a lot of interpretation that had to come into that as well all right well i don't see any other questions if you do think of any by all means please reach out to either eric or myself or your bkd advisor and we will be happy to answer those questions for you a lot to think about even as a go forward with revenue recognition as eric said it's not an implement and forget you got to keep keep every year on top of it and what you're doing and changing and making sure that you're getting that revenue recognized accordingly under the new rules so um really appreciate everyone attending today and uh look forward to hopefully seeing you again on a future webinar we have that great telecom series coming up lots of other great topics so thanks so much thank you thank you jessica and eric thanks again for attending our webinar and have a great day