Regulations

CLA Talks Video: How FASB Revenue Recognition Applies to Associations

  • 11/21/2016

Many leaders at associations and membership organizations are still wondering how the basic principles and complexities of Financial Accounting Standards Board’s (FASB) overhauled revenue recognition standards will apply to their finances. A new CLA Talks video captures comments by Cathy Clarke, CLA’s chief assurance officer, that address those and other important questions about the new rules.

In the five minute video, Clarke talks about the core principle for recognizing revenue (it should only be recorded when you transfer goods to your customer at an agreed-upon price) and the five steps to achieve that principle:

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

Clarke, a member of FASB’s not-for-profit advisory committee, made her remarks at the Third Annual CLA National Association Conference in September 2016. You can also download Clarke’s entire presentation, which includes other FASB updates affecting associations.

For nonprofits, the current effective date for the new rules is for years beginning on or after December 31, 2019 or June 30, 2020. Early implementation is permitted beginning after December 15, 2016.

Since the initial 2014 release of the FASB standards, CLA professionals have spoken and written extensively about the impact of the rules on foundations, health care, and other nonprofit organizations.

View additional installments in the CLA Talks video series.