5 Things Nonprofits Should Know About Revenue Recognition
Summary
Recently, the Financial Accounting Standards Board (FASB) updated its revenue recognition guidelines. We’ve written this blog to discuss these updates – since they’re the most significant changes to nonprofit accounting in recent history – and tell you we can help you automate and simplify revenue recognition with Sage Intacct. The Purpose of ASU 2018-08 and ASC 606 With ASC Topic 606, FASB seeks to bring U.S. Generally Accepted Accounting Principles (GAAP) standards for revenue recognition into closer alignment with international standards (IRFS) to achieve better clarity and consistency in treatment across nations, industries, and markets. Nonprofit finance teams must analyze and understand the updated standards to apply the correct judgments about each revenue stream in their accounting and disclosures. Consider following this process when implementing the new revenue recognition guidance: • Study the guidance in its entirety • Explain the potential impact to your organization’s leadership team and key stakeholders • Discuss your approach with your auditors • Conduct an analysis and document your conclusions • Review the analysis and conclusions with your auditor • Create and document new policies and procedures • Inform your leadership team and key stakeholders of the changes • Re-evaluate the impact of the changes after implementation What to Consider When Grading Revenue Streams There are two things to consider when grading revenue streams: materiality and timing.
