Revenue Recognition Update (and Reprieve)
By Richard Wright, HoganTaylor Assurance Partner
In recent newsletters we have been introducing the new revenue recognition standard, Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, (Topic 606), and discussing how the standard will impact not for profit (NFP) organizations. I recently attended the AICPA’s Not-for-Profit Industry Conference in Washington DC where ASU 2014-09 continues to be an important topic of conversation. In this article we want to bring you the most recent news regarding the standard along with more specific application guidance for NFP organizations.
Not uncommon with major revisions of a key accounting principle such as revenue recognition, after concerns voiced by constituents over implementation by the effective date, on July 9, 2015, the Financial Accounting Standards Board (FASB) voted to defer the effective date of the guidance by one year for all entities. Public companies, certain not-for-profit entities, and certain employee benefit plans will now apply the new guidance to interim reporting periods within annual reporting periods beginning after December 15, 2017. The new effective date for all other entities is fiscal years beginning after December 31, 2019. It is important to note that this is a tentative board decision and the final ASU formally amending the effective date is expected to be issued by the FASB by the end of the third quarter of 2015.
Many of you were able to join us back in May at our “Take 5” NFP seminar, which included Lee Klumpp, Assurance Director at BDO. Lee, who serves as BDO USA’s technical accounting leader for the nonprofit industry, has taken a more specific look at the impact of ASU 2014-09 on NFP organizations in this special edition of the Nonprofit Standard. In addition to revisiting the basic concepts of the new standard, including the five-step implementation process, the newsletter also includes hypothetical examples of some standard nonprofit transactions under ASU 2014-09 that are very helpful to understand how to approach a particular revenue stream or transaction.
For NFP organizations, unless you are an NFP that has issued (or is a conduit bond obligor for) publicly traded securities, you now have an additional year to consider and adopt the new standard. I will go out on a limb here and suggest that that the new revenue recognition standard isn’t quite making the Top 10 List of current issues and challenges for most NFP organizations. With a process that started 10 years ago with the standard setters and an implementation date now four years into the future, it’s understandably hard to get excited about how ASU 2014-09 will impact your organization. However we encourage NFP organizations to consider the additional year an opportunity to better plan and organize for the impending arrival of the new standard. We will continue to bring you updates and perspective regarding the new revenue recognition standard along the way.