ICYMIApplying-the-New-Accounting-Guidance-for-Contributions-The-CPA-Journal (1).pdf - Latest Articles ICYMI | Modifying the Pathway to Becoming a

ICYMIApplying-the-New-Accounting-Guidance-for-Contributions-The-CPA-Journal (1).pdf

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Latest Articles (/articles/) ( ( ( (https: () () Home () / CPA Journal Content () / ICYMI—Applying the New Accounting Guidance for Contributions ICYMI—Applying the New Accounting Guidance for Contributions ICYMI () , Analysis () , April 2019 Issue (- 2019-issue/) | May 2020 Get Copyright Permission () In Brief Not-for-pro±t organizations receive ±nancial donations as a matter of course, but the accounting for that revenue depends on whether the transaction is classi±ed as a contribution or an exchange, and the distinction between the two is not always easy to make. FASB has recently released new guidance on how to determine whether a transaction is a contribution or an exchange. The authors explain how the new guidance works and provide examples of how nonpro±ts should apply it when recognizing revenue from these transactions. * * * By Marc Taub, CPA () , David Hollander, CPA () , Lisette Rodriguez, CPA () and Robert A. Dyson, CPA () ICYMI | Modifying the Pathway to Becoming a Licensed CPA (- licensed-cpa/) 20 Questions about the Establishing a Health & Wellness Program in the… (- health-wellness-program-in-the-workplace/) (
In June 2018, FASB issued Accounting Standards Update (ASU) 2018-08, Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made, with the stated purpose of providing guidance in evaluating whether transactions should be accounted for as contributions or exchanges. In addition, the update introduces the concept of barriers in providing additional guidance on identifying conditions that would preclude the recognition of a contribution as revenue. ASU 2018-08 changes the reasoning process behind classi±cation of transactions, the nuances of which may affect the timing of revenue recognition. Contributions and exchanges are governed by different accounting pronouncements, and therefore may be recognized in different accounting periods and require different disclosures. FASB expects the new guidance on barriers to result in more contributions being classi±ed as conditional; conditional contributions will not be recognized as revenue and expense until those barriers are overcome. As a practical matter, ASU 2018-08 will not change the timing of the recognition of revenue and expenses in many instances, but reporting entities must follow the required process. In any event, the ultimate amount of revenue and expense recognized over time will be the same regardless of the transaction’s classi±cation. ()
ASU 2018-08 applies to all entities that receive or make contributions, including both business and not-for-pro±t entities (NFPs). The update is expected to have a greater impact on

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