The Financial Accounting Standards Board (FASB) has issued an Exposure Draft of a proposed ASU that may change how revenue is recorded by non-profit organizations.
The accounting world has been turned upside-down recently, with revenue recognition accounting principle changes soon becoming effective. It appears the FASB has now set its sights on nonprofit revenue accounting, in what may be a long-overdue refresh of existing standards. It’s still early in the process, so check back for future updates to this Exposure Draft. It will certainly take a different form before it’s officially adopted.
According to the FASB, it is “issuing this proposed ASU to clarify and improve the scope and the accounting guidance for contributions received and contributions made. The amendments in this proposed Update would assist entities in (1) evaluating whether transactions should be accounted for as contributions (nonreciprocal transactions) within the scope of Topic 958, Not-for-Profit Entities, or as exchange (reciprocal) transactions subject to other guidance and (2) distinguishing between conditional contributions and unconditional contributions.”
In short, the goal of the proposed ASU would be to (1) better distinguish between contributions and exchange transactions (whose in which value is received in return), (2) draw lines between which types of entities and individuals qualify as “resource providers,” and (3) more clearly define conditions on contributions, including instances where conditions are true barriers that must be overcome to complete the earning process, and those where conditions are not true conditions at all.
The Exposure Draft has a comment period through November 1, 2017. The FASB is seeking insight and practical feedback from practitioners and entities that would ultimately be impacted. Once adopted, it would affect most nonprofit organizations beginning in 2019 (for years BEGINNING AFTER December 15, 2018).
If this Exposure Draft affects you, please let us know if we can help you understand the potential ramifications.
If you would like to learn more about this topic, please contact:
Kenneth R. Cerini, CPA, CFP, FABFA
Ken is the Managing Partner of Cerini & Associates, LLP and is the executive responsible for the administration of our not-for-profit and educational provider practice groups. In addition to his extensive audit experience, Ken has been directly involved in providing consulting services for nonprofits and educational facilities of all sizes throughout New York State in such areas as cost reporting, financial analysis, Medicaid compliance, government audit representation, rate maximization, board training, budgeting and forecasting, and more.