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Posted by Mike Burns on Wed, May 27, 2015 @ 09:07 AM

FASB_delay_New_Revenue_RecognitionThe Financial Accounting Standards Board (FASB) recently proposed a one-year delay to its revenue recognition changes. For not-for-profit organizations, this would mean that the revenue recognition update would take effect for public entities in calendar year 2018 and in calendar year 2019 for nonpublic entities. Originally, public business entities, certain not-for-profit organizations and employee benefit plans were to adopt the new standards for interim and annual reporting periods beginning after December 15, 2016. All other entities were to adopt for annual reporting periods beginning after December 15, 2017 and interim periods within annual reporting periods after December 15, 2018.

The proposed accounting standards update to ASU 2014-09, which will likely be adopted, addresses stakeholder concerns that there is insufficient time to effectively and efficiently adopt the complex changes necessary for the new revenue recognition guidance. ASU 2014-09 Revenue from Contracts with Customers (Topic 606) makes significant changes to the way entities recognize revenue. It replaces current practice, which requires four criteria be met for revenue recognition, with a five-step approach. ASU 2014-09 is not expected to have much of an effect on not-for-profit organizations. Entities will not have to change how they account for contributions. They will only need to apply the standards to transactions classified as contracts with customers. This may simplify the transition, but care will need to be taken with qualifying transactions. Specifically, not-for-profits should focus on how the new standards affect licensing and royalty arrangements, advertising, sponsorships, memberships and subscriptions.

Not-for-profit stakeholders are working with the FASB to address some gray areas in ASU 2014-09, such as how to account for research grants. Sponsored arrangements, including research grants, currently do not fit into the definitions in the accounting standards update. They are not contributions nor are they contracts. The FASB is considering the best way to clarify research grant accounting. One option would be to create a new definition. Another would be to make the guidance for research grants similar to accounting for conditional contributions. Entities would recognize research grant costs as the costs occurred or as the entities met certain benchmarks. They would then make disclosures about the amount of the research grant that is outstanding at year end.

The FASB released the exposure draft in part to give entities more times to consider and address improvements like these to the revenue recognition guidance. Further guidance about how to transition and implement the new standards is expected soon.

In the interim, stakeholders can weigh in on whether the FASB should delay the changes to revenue recognition. Comments on the proposed update are due by May 29, 2015. Information about how to comment can be found on the FASB website.

If you have any specific questions, comments or concerns, please contact us here.


Burns_-_Web_ColorMike Burns is the CBIZ MHM National Not-for-Profit Practice Leader. He can be reached at 617.761.0584 or






Tags: Revenue Recognition Standard, FASB, Mike Burns

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