New Revenue Recognition Model to Affect Not-for-Profits 

Changes to the Way Revenue is Recognized 
Published July 24, 2015

In May 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued their much-anticipated converged standard on revenue recognition. FASB issued Accounting Standards Update (ASU) No. 2014-09 and the IASB issued International Financial Reporting Standard (IFRS) 15, both titled, Revenue from Contracts With Customers. With only some minor differences, FASB and IASB guidance represent a single, global, principles-based revenue recognition model.

The new revenue recognition model replaces virtually all existing revenue recognition guidance. The guidance affects all entities—public, private, and not-for-profit—that enter into contracts with customers to transfer goods or services or enter into contracts to transfer nonfinancial assets. Unless those contracts are within the scope of other standards (such as for leases, financial instruments, or insurance contracts), the impact of the new rules must be considered.

The extent of the impact on an entity will differ depending on various factors such as the transaction, its complexity, and the industry in which the entity operates. In some cases, there may be no change to the amount and timing of revenue recognition. In other cases, there will be changes, and those changes could be significant.

During its deliberations, FASB speculated that the industries most affected by changes in the amount and timing of revenue recognition will include telecommunications, aerospace, construction, real estate, and software. New qualitative and quantitative disclosure requirements about revenue and contracts with customers will have an impact on almost all entities, including not-for-profits.

On July 9, 2015, the FASB Board affirmed its intent to issue an ASU that will defer the effective date of its new revenue recognition standard by one year. This ASU will require public organizations, including not-for-profits who meet the criteria to be considered public entities, to apply the new revenue standard to annual reporting periods beginning after December 15, 2017. Nonpublic organizations will apply the new revenue standard to annual reporting periods beginning after December 15, 2018.

Additional Resources
For more information, download the AICPA’s publication Financial Reporting Brief: Roadmap to Understanding the new Revenue Recognition Standard.  Refer to the AICPA Revenue Recognition Center for additional resources, including publications, webcasts and CPE events aimed to bring you up to speed on the new standard.

To read ASU No. 2014-09 in its entirety, download this PDF.


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