Facebook Inc. (FB)
Analysis of Revenues
High level of difficulty
Accounting Policy on Revenue Recognition
On January 1, 2018, Facebook adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605), using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported in accordance with Facebook’s historic accounting under Topic 605. The impact of adopting the new revenue standard was not material to Facebook’s condensed consolidated financial statements and there was no adjustment to beginning retained earnings on January 1, 2018.
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration Facebook expects to be entitled to in exchange for those goods or services.
Facebook determines revenue recognition through the following steps:
- identification of the contract, or contracts, with a customer;
- identification of the performance obligations in the contract;
- determination of the transaction price;
- allocation of the transaction price to the performance obligations in the contract; and
- recognition of revenue when, or as, Facebook satisfies a performance obligation.
Revenue excludes sales and usage-based taxes where it has been determined that Facebook is acting as a pass-through agent.
Source: 10-K (filing date: 2019-01-31).
Revenues as Reported
Facebook Inc., Income Statement, Revenues
US$ in millions
|12 months ended||Dec 31, 2018||Dec 31, 2017||Dec 31, 2016||Dec 31, 2015||Dec 31, 2014|
|Payments and other fees|
|Revenue||Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).||Facebook Inc.’s revenue increased from 2016 to 2017 and from 2017 to 2018.|