Not-for-Profit Quick Read

Implementing ASU No. 2018-08: Get prepared and stay prepared with proper documentation

July 22, 2020

Growing up in a family of six, credit was equally taken, but blame was singularly given. Siblings often seek to blame their minor misdeeds on their unsuspecting family, knowing there is often little parents can do but rely on the recantation. How do you prove that something happened, after it already happened?

When it comes to accountability, I credit my siblings and my training as an auditor to document, document, and document. As the saying goes, if you didn’t document it, then it didn’t happen. Such an approach to accounting, although it may require more effort, makes for much easier conversations with your management, colleagues, and especially your auditors. And you will almost certainly be asked about the determination of revenue recognition, especially on large transactions.

So how do you and your team prepare for those conversations? Have you trained your team on FASB ASU No. 2018-08, Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made, and how it may affect your organization? How do you currently track your revenue streams? Do you use a subledger? A binder on your senior accountant’s desk? Shared folders? In your general ledger or ERP, have you implemented standardized documentation procedures for revenue recognition?

I recommend a single resource that can be used as a tool for both training and documentation. Ideally, this resource will have the key concepts of ASU No. 2018-08 as well as appropriate fields where you can efficiently document your determinations and justifications for each revenue stream—all in one file that can be easily shared with your team and key stakeholders.

What are three key items you need to document to help you implement ASU No. 2018-08?

  1. Primary Beneficiary. Who is the primary beneficiary? Is it the general public (as with most government grants)? Is it the entity or individual providing the funds? Is it a third party? Document your rationale for this determination.
  2. Contribution or Exchange. Be sure to consider intellectual property (IP) in this determination; that is, if the funder maintains ownership of all IP generated, it is more indicative of exchange (be careful with subcontracts). Also consider payment terms, such as fee for service, advances, and the like. If funders are individuals, are they taking a tax deduction (indicative of contribution)? Again, be sure to document your rationale alongside your determination.
  3. Barriers and Rights of Return. Document in detail a contributor's right of return or promisor's right of release from obligation to transfer assets, as well as any barriers to entitlement that you have as the resource recipient and what type they are (for example, cost share requirements). These items will drive revenue recognition under ASU No. 2018--08.

Keep a copy of your revenue recognition documentation on a shared network with your team, or simply attach a copy to the supporting documentation for each transaction. Not only will this boost accountability, but it also will help to ensure that your team is prepared to properly implement ASU No. 2018-08, recount the details of revenue recognition for certain transactions when asked, and provide appropriate training and information to key stakeholders.

Be sure to read about how to prepare your organization for a successful audit, and visit the AICPA Not-for-Profit Section’s Accounting and Financial Reporting Resource Library for more information on revenue recognition and grants and contracts. 

Not-for-Profit Section members can download the Grants and Contracts Implementation Tool here.

Join the Not-for-Profit Section today!


Paul Chobanian is a member of the AICPA Not-for-Profit Expert Panel and a Senior Director of Finance with Plan International USA, a not-for-profit headquartered in Warwick, RI, with over 13 years of experience in public and private accounting.