New FASB ASU 2014-09 Revenue Recognition Standards for Nonprofit Entities: Implementing ASC 606 for NFPs

Description

Advisers to NFPs face the most substantive changes to financial reporting in almost a quarter century. The most dramatic alteration for nonprofit entities is the new FASB standard 2014-09 governing revenue recognition. In addition to revamping of financial statement presentation issued in ASU No. 2016-14, NFPs must adopt new FASB standards on revenue recognition. The changes apply to all nonprofits’ reporting years after Dec. 15, 2018, so NFPs must implement the changes now to ensure compliance with the new standard.

The new reporting standards represent an overhaul of how NFPs record and recognize revenue. NFPs must apply the new guidance in discerning between contributions and exchange transactions to determine when to recognize an inflow as revenue. Advisers to nonprofits must identify any “performance obligations” accompanying inflows and allocate the portion of membership or other payments based on a “stand-alone selling price” for the obligation.

While the new standard offers some clarity in distinguishing between contributions and exchange transactions, FASB acknowledges that the classification will be highly dependent on the adviser’s judgment. The new rules thus present challenges to auditors of NFPs, who need to understand how an NFP identifies any performance obligations created as part of any contribution transaction.

Listen as our experienced panel provides a thorough and practical guide to the new revenue recognition standards for NFPs to prepare your nonprofit clients for significant changes in financial reporting.