Asu fall break 201812/19/2023 For some organizations, the new standards offer the potential to alleviate the administrative burden of implementing FASB’s revenue recognition standard, which has been one of the biggest accounting changes in recent years. Note, though, that the changes do not apply to the transfer of asset from governments to businesses.įurthermore, one of the primary goals of the new ASU is to standardize grant classification across various not-for-profit sectors, such as nonprofit colleges and universities. However, the amendments within the update apply to all organizations that receive or make contributions of cash and other assets, including business enterprises. The new accounting standard primarily impacts not-for-profit entities as contributions are a considerable source of revenue. An unconditional contribution is recognized when received, while a conditional contribution is recognized when barriers restricting access to it are overcome. This classification is significant as it affects the timing of revenue and expense recognition. ASC 606, Revenue from Contracts with Customers governs exchange transactions, while contributions fall under ASC 958-605, Not-for-Profit Entities – Revenue Recognition.Īdditionally, the new ASU provides more explicit guidance on how to determine if the contribution is conditional or unconditional. Additionally, it offers guidance as to how to determine whether a contribution is conditional or unconditional.ĭifferentiating between an exchange and a contribution is important because these two types of transactions follow separate accounting standard codifications. The new ASU further specifies whether a transfer of assets – or the reduction, settlement, or cancellation of liabilities – is a contribution or an exchange transaction. What is ASU 2018-08?įASB issued ASU 2018-08 with the intent of clarifying and improving the scope and accounting guidance for contributions of cash and other assets received and made by not-for-profit organizations. With additional parts of ASU 2018-08 taking effect at the end of 2019, the time is now to make sure your organization is on the right track. Understanding the new guidance and definitions is vital for ensuring you are performing best accounting practices. More specifically, rather than change the existing rules, the new ASU clarifies when a transfer of cash or other assets received and made qualifies as a contribution or exchange transaction. In June 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-08, Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made, to provide needed guidance about accounting for nonprofit grants and contracts.
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