Takeaways from The Bonadio Group’s 2019 Not-for-profit Educational Seminars
Each year, The Bonadio Group hosts seminars throughout New York State to help leaders of non-profit organizations understand the new regulations, laws and policies that must guide their operations. The most recent round of events, in December 2019, included a review of the revenue recognition model that is now in effect for all organizations. Within the scope of this model are exchange transactions. Contributions/pledges, non-exchange government grants, lease contracts and investment returns are not included.
When implementing the revenue recognition model, not-for-profit organizations should take the following steps:
- Identify the contract(s) with a customer.
- Identify the performance obligations in the contract (the services that are rendered should be detailed in the contract).
- Determine the transaction price (contracted price includes net of explicit and implicit concessions).
- Allocate the transaction price to the performance obligations in the contract.
- Recognize revenue when (or as) the entity satisfies a performance obligation (when services are provided).
In preparation for an audit under the new revenue recognition guidance, not-for-profit leaders should consider the following best practices:
- Document revenue service lines and how you determine valid contracts exist for each.
- Document how your organization determines the ability and probability of payment.
- Determine whether your organization provides bundled services and document your conclusions.
- Determine the transaction price for each revenue service line, identifying any price concessions.
- Examine contracts that cross fiscal years and determine whether this will result in deferred revenue.
- If necessary, update revenue cycle policies to reflect current practice.
- Expect and prepare to have discussions with your auditors regarding revenue recognition policies.
- Expect to have several pages of new revenue recognition disclosures in your organization’s financial statements.
- Draft footnotes with your audit team before the audit – no reason to wait.
To learn more about revenue recognition and other regulations impacting tax-exempt organizations, visit https://www.bonadio.com/industries-served/tax-exempt.
Subscribe to email updates here: https://www.bonadio.com/newsletter-sign to receive information about The Bonadio Group’s 2020 Not-for-profit seminars. You can also contact me directly at: firstname.lastname@example.org with any questions.