Category Archives: MyLogIQ Fact Studies

Disclosures from two giants (Intel and Caterpillar) in this week’s 10-K regarding revenue recognition

Disclosures from two giants (Intel and Caterpillar) in this week’s 10-K regarding revenue recognition

INTEL CORP: 10-K Filed February 17, 2017:
ACCOUNTING POLICIES
We recognize net product revenue when the earnings process is complete, as evidenced by an agreement, delivery has occurred, pricing is deemed fixed, and collection is considered probable. We record pricing allowances, including discounts based on contractual arrangements with customers, when we recognize revenue as a reduction to both accounts receivable and net revenue. Because of frequent sales price reductions and rapid technology obsolescence in our industry, we defer product revenue and related costs of sales from component sales made to distributors under agreements allowing price protection or right of return until the distributors sell the merchandise. The right of return granted generally consists of a stock rotation program in which distributors are able to exchange certain products based on the number of qualified purchases made by the distributor. Under the price protection program, we give distributors credits for the difference between the original price paid and the current price that we offer. We include shipping charges billed to customers in net revenue, and include the related shipping costs in cost of sales.

Revenue Recognition – Contracts with Customers. This standard was issued to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. GAAP. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.   Effective in the first quarter of 2018. We plan to adopt the standard retrospectively with the cumulative effect of initially applying it recognized at the date of initial application (“modified retrospective” approach).   Our assessment has identified a change in revenue recognition timing on our component sales made to distributors. We expect to recognize revenue when we deliver to the distributor rather than deferring recognition until the distributor sells the components.
On the date of initial application, we will remove the deferred net revenue on component sales made to distributors through a cumulative adjustment to retained earnings. We expect the revenue deferral, historically recognized in the following period, to be offset by the acceleration of revenue recognition as control of the product transfers to our customer.
Our assessment has also identified a change in expense recognition timing related to payments we make to our customers for distinct services they perform as part of cooperative advertising programs. We expect to recognize the expense for cooperative advertising in the period the marketing activities occur. We currently recognize the expense in the period the customer is entitled to participate in the program, which coincides with the period of sale.
On the date of initial adoption, we will capitalize the expense of cooperative advertising not performed through a cumulative adjustment to retained earnings. We expect the recognition of capitalized advertising to offset the deceleration in expense recognition until the marketing services are performed.
We will continue our assessment, operate parallel systems and processes, as well as finalize our evaluation of any changes to our accounting policies and disclosures. This excludes our planned divestiture of Intel Security Group (ISecG).

Caterpillar Inc. 10-K Filed February 15, 2017:

Sales of Machinery, Energy & Transportation are recognized and earned when all the following criteria are satisfied: (a) persuasive evidence of a sales arrangement exists; (b) price is fixed and determinable; (c) collectibility is reasonably assured; and (d) delivery has occurred. Persuasive evidence of an arrangement and a fixed or determinable price exist once we receive an order or contract from a customer or independently owned and operated dealer. We assess collectibility at the time of the sale and if collectibility is not reasonably assured, the sale is deferred and not recognized until collectibility is probable or payment is received. Typically, where product is produced and sold in the same country, title and risk of ownership transfer when the product is shipped. Products that are exported from a country for sale typically pass title and risk of ownership at the border of the destination country.

Revenue recognition – In May 2014, the Financial Accounting Standards Board (FASB) issued new revenue recognition guidance to provide a single, comprehensive revenue recognition model for all contracts with customers. Under the new guidance, an entity will recognize revenue to depict the transfer of promised goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. A five step model has been introduced for an entity to apply when recognizing revenue. The new guidance also includes enhanced disclosure requirements, and is effective January 1, 2018, with early adoption permitted for January 1, 2017. Entities have the option to apply the new guidance under a retrospective approach to each prior reporting period presented, or a modified retrospective approach with the cumulative effect of initially applying the new guidance recognized at the date of initial application within the Consolidated Statement of Changes in Stockholders’ Equity. We plan to adopt the new guidance effective January 1, 2018.

We have made substantial progress in our evaluation of the impact of the new standard. Under the new guidance, we anticipate sales of certain turbine machinery units will change to a point-in-time recognition model. Under current guidance, we account for these sales under an over-time model following the percentage-of-completion method as the product is manufactured. In addition, under the new guidance we will begin to recognize an asset for the value of expected replacement part returns. At this time we have not identified any impacts to our financial statements that we believe will be material in the year of adoption. We are still evaluating the impact to certain revenue streams within our Energy & Transportation and Resource Industries segments and expect that evaluation to be completed during the first half of 2017. Based on the current estimated impact to our financial statements, we plan to adopt the new guidance under the modified retrospective approach.

New Trends in Disclosure. MyLogIQ teams up with EY & FERF on “Disclosure effectiveness in action: companies make great strides.”

Disclosure effectiveness has been generating a lot of buzz. Forward-thinking enterprises are creating innovative approaches to the presentation of key metrics in disclosures, particularly in MD&A and Risk Factors. The world is taking notice. As you might imagine, we at MyLogIQ love a good trend. We’re a bit obsessed with disclosure data. So we teamed up with EY & FERF and supplied key data and metrics for the recently published report “Disclosure effectiveness in action: companies make great strides.” The full report can be found in our recent article, linked below. Our intelligent algorithms curated, sorted, and analyzed disclosures pulled from S&P 500 companies. Our data clearly shows new trends…

Click on the picture below to view our full article with a link to the report:
New Trends in Disclosure
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MyLogIQ Fact Study

Analysis of 10-K Filing Dates & Auditor Opinion Date

By using data retrieved from MyLogIQ, we were able to compile this analysis about filing dates for annual reports with a perspective on auditor opinion date, for all public companies. This study is based on annual reports as filed in the year 2015 for FYE in 2014. We will publish updates to this report when the annual reports for the majority of the companies FYE 2015 are filed in 2016.

Summary of Findings:
• Average number of days it takes a Large accelerator to file 10-K: 55 days
• Average number of days it takes an auditor to sign off (based on audit opinion date) for large accelerated filer: 55 days
• 16% of Large companies have their FYE outside of December, yet the average number of days to file (54) is only one day less.
• Fastest filing for FYE Dec. 31, 2015 is 27 days after FYE by filer United Rentals, Inc. (Ticker: URI) and filer Schlumberger, Ltd. (Ticker: SLB), while it was 21 days for FYE Dec 31, 2014. Which was also filed by United Rentals, Inc. (TICKER: URI).
• Within 30 Days after a Dec. 31st FYE, 7 companies filed their 10-K in 2016 vs 8 for FYE 2014.
• Auditors sometimes make mistakes and send in the auditor’s report signed before the FYE of the registrant.
• Majority of the Non-Accelerated filers don’t file their XBRL along with their 10-K (in html).

 

Overall picture of Annual report filing for all public companies:

On average it took Large Accelerated Filer companies 55 days from the fiscal year end to the audit opinion date, coinciding exactly with the average days it took Large Accelerated Filer companies to file their 10-Ks. We see this pattern continue with the other filers as well in the following table.

No. of Days Between 2014 FYE and Opinion Date
(days taken to file 10-K with the SEC)

Large Accelerated Filers

Accelerated Filers Non-Accelerated Filers Smaller Reporting Companies
55 (55) 69 (69) 73 (75) 97 (99)

 

Only 16% of Large Accelerated Filer companies don’t have their fiscal year end date fall in December. On average, it confirms auditors need 54-55 days to review a company’s annual financials (LAF). It raises the question, how are some giants like Schlumberger, Netflix, Amazon and Facebook getting their financials audited and filed within 30 days?

Filer Status

No. of Companies

(in %)

Average No. Of Days It Takes to Publish 10-K

(FYE = Dec)

No. of Companies

(in %)

Average No. Of Days It Takes to Publish 10-K

(FYE ≠ Dec)

Large Accelerated Filers

84% 55 16% 54

Accelerated Filers

80% 68 20%

73

Non-Accelerated Filers 89% 78 11%

81

Smaller Reporting Companies 66% 96 34%

105

 

Detailed Analysis by Filer Status

Large Accelerated Filer:
For FYE 2014, on average it took all Large Accelerated Filer companies 55 days to publish their annual reports, regardless. Although the fiscal year end date for all of these companies vary and are spread throughout the year, 84% of them have a fiscal year end of December 31st, making it an extremely busy season for both companies and auditors. While the SEC gives Large Accelerated Filers 60 days past their fiscal year end to publish their annual reports, there are some overachievers who managed to do it in 30 days or less.

No. of Large Accelerated Filer Companies who filed within 30 days whose Fiscal Year Ends on Dec. 31, 2014 = 8
No. of Large Accelerated Filer Companies who filed within 30 days whose Fiscal Year Ends on Dec. 31, 2015 = 7

The following table shows all of the Large Accelerated Filer companies with FYE December 31st in 2014 and in 2015 who filed in half the time (30 days) of the 60-day SEC filing deadline:

Fastest Large Accelerated Filer Companies Filing 10-K Whose Fiscal Year Ends on December 31st

2014

2015

Company

Days to File Company

Days to File

UNITED RENTALS INC /DE

21 SCHLUMBERGER LTD /NV/ 27

MDC HOLDINGS INC

28 UNITED RENTALS INC /DE

27

SCHLUMBERGER LTD /NV/

29 FACEBOOK INC

28

NETFLIX INC

29 NETFLIX INC

28

FACEBOOK INC 29 AMAZON COM INC

29

BROADCOM CORP

29 CAMERON INTERNATIONAL CORP

29

AMAZON COM INC

30 KANSAS CITY SOUTHERN

29

KANSAS CITY SOUTHERN

30

 

4

 

Accelerated Filers:
For FYE 2014, on average it took all Accelerated Filer companies 69 days to publish their annual reports. While the SEC gives Accelerated Filers 75 days past their fiscal year end to publish their annual reports, there are some overachievers who manage to do it in half the time.

No. of Accelerated Filer Companies who filed within 38 days whose Fiscal Year Ends on Dec. 31, 2014 = 6
No. of Accelerated Filer Companies who filed within 38 days whose Fiscal Year Ends on Dec. 31, 2015 = 5

The following table shows all of the Large Accelerated Filer companies with FYE December 31st in 2014 and in 2015 who filed in half the time (38 days) of the 75-day SEC filing deadline:

Fastest Accelerated Filer Companies in Filing 10-K Whose Fiscal Year Ends on December 31st

2014

2015

Company

Days to File Company

Days to File

FLOTEK INDUSTRIES INC/CN/

27 WL ROSS HOLDING CORP.

14

UNITIL CORP

28 VASCULAR SOLUTIONS, INC

22

VASCULAR SOLUTIONS INC

34 FLOTEK INDUSTRIES INC/CN/

27

CAMBREX CORP

37 UNITIL CORP

28

22nd CENTURY GROUP, INC

37 HAWAIIAN HOLDINGS, INC

39

FREESCALE SEMICONDUCTOR, LTD

37

 

2a

 

Non- Accelerated Filers:
For FYE 2014, on average it took all Non-Accelerated Filer companies 75 days to publish their annual reports. While the SEC gives Non-Accelerated Filers 90 days past their fiscal year end to publish their annual reports, there are some overachievers who manage to do it in 45 days or less.

No. of Non-Accelerated Filer Companies who filed within 45 days whose Fiscal Year Ends on Dec. 31, 2014 = 20
No. of Non-Accelerated Filer Companies who filed within 45 days whose Fiscal Year Ends on Dec. 31, 2015 = 6 (As of Feb. 10, 2016)

The following table shows all of the Large Accelerated Filer companies with FYE December 31st in 2014 and in 2015 who filed in half the time (45 days) of the 90-day SEC filing deadline:

Fastest Non-Accelerated Filer Companies in Filing 10-K Whose Fiscal Year Ends on December 31st

2014

2015

Company

Days to File Company

Days to File

KANSAS CITY SOUTHER DE MEXICO, S.A. DE C.V.

30 PACE HOLDINGS CORP

26

GENERAL MOTORS FINANCIAL COMPANY, INC

35 MEDICAL INFORMATION TECHNOLOGY, INC

29

BIOMED REALTY L.P.

37 GENERAL MOTORS FINANCIAL COMPANY, INC

34

PACIFIC GAS & ELECTRIC Co

41 CNX COAL RESOURCES LP

36

HIGHWOODS REALTY LTD PARTNERSHIP

41 NBCUNIVERSAL MEDIA, LLC

36

KILROY REALTY, L.P.

41 HIGHWOODS REALTY LTD PARTNERSHIPS

40

OWENS-ILLINOIS GROUP INC

41

CARETRUST REIT, INC

42

ALLIANCEBERNSTEIN L.P.

43

TOBIRA THERAPEUTICS, INC

43

BALTIMORE GAS & ELECTRIC CO

44
COMMONWEALTH EDISON CO

44

DTE ELECTRIC CO

44

FORD MOTOR CREDIT CO LLC

44

PECO ENERGY CO

44

UNION CARBIDE CORP /NEW/

44

MLM INDEX FUND

44

EXELON GENERATION CO LLC

44

TROPICANA LAS VEGAS HOTEL & CASINO, INC

44
IMS HEALTH HOLDINGS, INC

44

 

2b

 

Smaller Reporting Companies:
For FYE 2014, on average it took all Smaller reporting companies 99 days to publish their annual reports, regardless. While the SEC gives Large small reporting Filers 90 days past their fiscal year end to publish their annual reports, there are some overachievers who manage to do it in 45 days or less.

No. of Smaller Reporting Companies who filed within 45 days whose Fiscal Year Ends on Dec. 31, 2014 = 18
No. of Smaller Reporting Companies who filed within 45 days whose Fiscal Year Ends on Dec. 31, 2015 = 12 (As of Feb. 10, 2016)

The following table shows all of the Smaller Reporting companies with FYE December 31st in 2014 and in 2015 who filed in half the time (45 days) of the 90-day SEC filing deadline:

Fastest Smaller Reporting Companies in Filing 10-K Whose Fiscal Year Ends on December 31st

2014

2015

Company

Days to File Company

Days to File

DIEGO PELLICER WORLDWIDE, INC

28 DUTCH OVEN GOLD GROUP, INC

27

COMSTOCK MINING, INC

29 RAMPART STUDIOS, INC

27

INFINITY ENERGY RESOURCES, INC

35 COMSTOCK MINING, INC

28

ELECTRONIC SYSTEMS TECHNOLOGY INC

37 ANDES 9, INC

32

BOSTON OMAHA Corp

37 ANDES 8, INC 32

FUTURE HEALTH CARE OF AMERICA

37 HEADGEPATH PHARMACEUTICAL, INC

32

INUVO, INC 40 ANDES 7, INC

32

CORBUS PHARMACEUTICALS HOLDINGS, INC

41 YANGTZE RIVER DEVELOPMENT, LTD

33

SCI ENGINEERED MATERIALS, INC 42 PARAGON REAL ESTATE EQUITY & INVESTMENT TRUST

36

PARAGON REAL ESTATE EQUITY & INVESTMENT TRUST

42 LABSTYLE INNOVATIONS CORP

39

AKARI THERAPEUTICS PLC

42 SCI ENGINEERED MATERIAL, INC

40

GLOBAL SEAFOOD HOLDINGS CORP

43 TRANSACT ENERGY CORP

40

RVUE HOLDINGS, INC.

43
MEDIZONE INTERNATIONAL INC

44

HEDGEPATH PHARMACEUTICALS, INC

44
PROTEA BIOSCIENCES GROUP, INC

44

SEMLER SCIENTIFIC, INC

44
TRIUMPH VENTURES CORP

44

 

2c

 

Curious Public Accountant Errors:

We never thought we would find auditors making a mistake on their opinion date, but the table below shows the companies whose auditors signed off on their reports prior to the FYE. Are the auditors thinking ahead?

The following table lists the companies whose auditor reports are dated before their fiscal year end, in 2015:

Company Filer Status Auditor FYE

Opinion date

CALAVO GROWERS, INC.

Large Accelerrated ERNST & YOUNG LLP 10/31/2015

1/30/2015

CHINA YCT INTERNATIONAL GROUP, INC.

Smaller Reporting Company PARITZ & COMPANY PA 3/31/2015

7/9/2014

REGI U S INC

Smaller Reporting Company MALONEBAILEY LLP 4/30/2015

7/28/2014

TARSIER LTD. Smaller Reporting Company KCCW ACCOUNTANCY CORP 5/31/2015

9/15/2014

VERITEC INC

Smaller Reporting Company WEINBERG & COMPANY, P.A. 6/30/2015

1/21/2015

PETRICHOR CORP.

Smaller Reporting Company KLJ & ASSOCIATES, LLP 5/31/2015

8/20/2014

CODE NAVY

Smaller Reporting Company YU CERTIFIED PUBLIC ACCOUNTANT, P.C. 6/30/2015

12/11/2014

PEAK PHARMACEUTICALS, INC.

Smaller Reporting Company EIDE BAILLY LLP 9/30/2015

1/12/2015

AXIOM HOLDINGS, INC.

Smaller Reporting Company SADLER, GIBB AND ASSOCIATES, LLC 9/30/2015

1/20/2015

INTERUPS, INC.

Smaller Reporting Company SADLER, GIBB AND ASSOCIATES, LLC 5/31/2015

1/20/2015

 

Other Observations:

Another observation we have made was the number of companies who filed their XBRL on the same day as their HTML in 2014. The following table shows the number of companies who filed their XBRL and HTML on the same day based on the filer status.

Was the XBRL & HTML filed on the same day?

Filer Status

Large Accelerated Filers

Accelerated Filers Non-Accelerated Filers

Smaller Reporting Companies

Yes

1811 1321 741

2684

No

18 42 591

171

 

Future Study & Follow-Up:

After completion of period end, during the month of March 2016, MyLogIQ, LLC will be releasing a study of earnings releases.