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ASC 606 & Revenue Recognition Update for Nonprofits

- Sunday, January 07, 2018

Is Your Nonprofit Ready for ASC 606?

The transition to ASC 606 for nonprofits is here for some and looms on the horizon for others. Are you ready? Can your accounting software handle the new revenue recognition requirements?

For nonprofits to be fully prepared, it's important to know the following, as covered in this blog:

  • Effective dates
  • Understanding new revenue recognition rules
  • Determining if you have the right accounting software to handle revenue recognition requirements

Nonprofit ASC 606 Effective Dates

There are two effective dates for each type of nonprofit:

  • For nonprofits that have issued, or are conduit bond obligors for, securities traded, listed, or quoted on an exchange or an over-the-counter market, the standard takes effect in annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period
  • For all other nonprofits, the standard takes effect in annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019

New Revenue Recognition Rules for Nonprofits

As detailed in this Journal of Accountancy article by Ken Tysiac, there are several distinctions for recognizing revenue:

  • Contributions vs. Exchange Transactions: nonprofits can continue to recognize contributions upon receipt, but must recognize exchange transactions based on their own intent in soliciting the asset as well as the resource provider's intent in providing the asset
  • Conditional vs. Non-Conditional: nonprofits are required to recognize a contribution only when they have high confidence that the conditions accompanying the contribution will be met
  • Promises vs. Intentions: nonprofits can record unconditional promises to give but should not record intentions to give
  • Agent vs. Intermediary: when a donor gives to a nonprofit without specifying a beneficiary, the nonprofit can recognize the revenue; if the donor specifies a third-party beneficiary, the nonprofit receiving the donation as a pass-through entity should not recognize the contribution

To further understand what each of these means for your nonprofit, we encourage you to read more details in Tysiac's article as well as to consult with your auditors prior to your next audit.

Nonprofit Accounting Software & Revenue Recognition

Based on our 30 years of experience implementing accounting software for nonprofits, Sage Intacct is an effective solution for capturing all of these new revenue recognition requirements. Sage Intacct has helped on-premises and cloud software vendors adhere to ASC 606 and the SOP 97-2 and ASC 985 revenue recognition standards replaced by ASC 606.

To learn more about how Sage Intacct can help your nonprofit adhere to ASC 606 revenue recognition requirements, contact us to speak with one of our experts and to see a demo.

Contact us to learn more about nonprofit revenue recognition accounting software

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