A Look at New Revenue Recognition Standards
New standards released by the Financial Accounting Standards Board (FASB) mean new challenges for many nonprofits. In a recent episode put out by the Journal of Accountancy Podcast, guest expert Cathy Clarke offers some tips for nonprofits facing new revenue recognition standards.
The podcast covers a wide range of items regarding revenue recognition. Here’s a quick glance at some of the issues discussed:
- In response to the new FASB standards, the American Institute of Certified Public Accountants (AICPA) created a Revenue Recognition Guide that is available in print and online.
- A good starting place for nonprofits, when it comes to meeting the new standards, is to develop a solid picture of the non-contribution based revenue streams within their organization that will be impacted. They can then assess the impact. Regardless of how revenue is earned, all organizations will feel the impact of new disclosure requirements.
- Clarke explains that the FASB issued additional clarification regarding grants and contracts because the new guidance caused some confusion about the definition and types of contributions. They created a helpful flow chart for guidance.
- The key differences between reciprocal and non-reciprocal transactions.
- The definitions of two key terms, “right of return” and “barrier” are discussed.
- Clarke offers some cases where government grants are not considered nonreciprocal.
- The discussion ends with a look at methods for proactively executing documents in order to gain a more preferable accounting treatment.
For more details, listen to the podcast episode in full at the Journal of Accountancy.