There are 3 big changes that will need to be implemented for future annual reporting that affects several types of business entities—public, private, and not-for-profit — that record transactions using Generally Accepted Accounting Principals (GAAP).
Revenue Recognition:
Implementation of the new revenue recognition changes will require you to:
- Identify contracts with the customer
- Identify separate performance obligations within the contract
- Determine the transaction price
- Allocate the transaction price to the various performance obligations
- Recognize revenue when the performance obligations are satisfied
Lease Standards:
New standard update significantly alters current accounting treatment of leases:
- Balance sheets will be impacted, as a right of use asset and lease liability will have to be recognized on most leases
- Now, there are two types of leases:
- Operating Leases (not to be confused with operating leases under old rules)
- Financing Leases
Not for Profit Changes:
Substantially all not-for-profits will be affected by the new standards, some more than others:
- Qualitative and quantitative information on financial assets available for general expenditures will be disclosed
- Net asset categories will be “assets without donor restrictions” and “assets with donor restrictions”
- Investment expenses will include the conduct or supervision of strategic activities involved in generating investment return
- A statement of functional expense will be required for all not-for-profit organizations
Are you ready for the changes?
If you would like to discuss your situation or have additional questions, please contact our professionals at 859-331-1717.
