A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer services to a customer). Applicability. RAs are advised that NIH rescinded some of the flexibilities outlined in NOT-OD-086. Until all firms are required to adopt ASU 2016-13, regulatory reports have to accommodate pre and post ASU 20016-13 reporting. ASU 2014-09 was originally effective for private and nonprofit entities with fiscal years beginning after December 15, 2017. The Board will redeliberate the proposed change to effective dates once it completes its outreach at the close of the 15-day comment period on May 6, 2020. For all other entities, including nonprofits and employee benefit plans, the update is effective for fiscal years beginning after December 31, 2018, which means 2019 calendar year-ends. This guidance is effective for annual periods, meaning that many private companies have already been taking steps to implement its guidance, and the first audit of financial statements that have implemented this standard may very well be underway. The transaction price can be a fixed amount of customer consideration, but it may sometimes include variable consideration or consideration in a form other than cash. For private companies and private NFPs, the leasing standard is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The effective date for non-public insurers is also deferred one year to January 1, 2025. Part 1 covers the objectives of the new standard; Part 2 looks at its new recognition and measurement guidance; and Part 3 provides a summary of its enhanced disclosure requirements.). The Impact of ASU 2016-01 ASU 2016-01 is effective for public business entities for fiscal years beginning after December 15, 2017. All companies in the scope of ASU 2018-12 on long-duration contracts. In some cases, the reporting organization should combine contracts and account for them as one contract. Step 5: Recognize revenue when (or as) the reporting organization satisfies a performance obligation. 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. Early application is not permitted. In addition, there is guidance on the accounting for contract modifications. If you have any questions or concerns about these delays and guidance, or would like additional information related to COVID-19, visit PYA’s COVID-19 hub, or contact one of our PYA executives below at (800) 270-9629. Deferral for SEC filers that are eligible to be ‘smaller reporting companies’, non-SEC filers and all other companies, including not-for-profit companies and employee benefit plans. Please visit our COVID-19 hub frequently for the latest updates, as we are working diligently to put forth the most relevant helpful guidance as it becomes available. As a result, different industries use different ac-counting for economically similar transactions. What Has the FASB Done to Address These Issues? It is probable that the reporting organization will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities: The effective date is reporting years beginning after December 15, 2020, or FY23 for most colleges and universities. Calendar year-end SEC filers other than smaller reporting companies (SRCs) w ill be required to adopt ASU 2018-12 on … The minimum number of sick leave hours paid from this program is 500 per person, per retirement system. The new guidance is a major achievement in the Boards' joint efforts to improve this important area of financial reporting. On June 10, 2020, the FASB voted to propose a deferral of one year for the effective date of ASU-2018 for all SEC filers to January 1, 2023, with an option to early adopt. Otherwise, a reporting organization recognizes an asset from the costs to fulfill a contract if those costs meet all of the following criteria: Disclosures – The new guidance also includes a cohesive set of disclosure requirements that will provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a reporting organization’s contracts with customers. A reporting organization recognizes revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer, which is when the customer obtains control of that good or service. ASU 2019-10. Thanks for reaching out. The new revenue recognition guidance applies to each contract that a reporting organization has agreed upon with a customer and meets the following criteria: Step 2: Identify the performance obligations (promises) in the contract. Many hospitals and health systems are classified as public not-for-profits and are on the frontlines of fighting this pandemic. To achieve that core principle, a company or other organization applies the following five steps: Step 1: Identify the contract with a customer. For public organizations, the guidance in the Update is effective for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Specifically, a reporting organization will be required to provide information about: Additionally, the guidance requires a reporting organization to provide quantitative and/or qualitative information about assets recognized from the costs to obtain or fulfill a contract with a customer. The objective of the new guidance is to establish the principles to report useful information to users of financial statements about the nature, timing, and uncertainty of revenue from contracts with customers. As a practical expedient, a reporting organization may expense these costs when incurred if the amortization period is one year or less. In 2013, the FASB and the IASB announced the formation of a joint transition resource group to be established after the final guidance has been issued. The lease accounting standard was effective January 1, 2019, for calendar-year-end public companies and not-for-profit entities that are a conduit bond obligor (public not-for-profits). More details will be announced on the FASB website. What Other Guidance Is Contained in the Accounting Standards Update? We will also provide additional updates with any new information. The information listed under this section is presented for reference only, and applies to expenditures with a date of 06/16/2020 or earlier. The ASU allows for the deferral of the effective date for Topic 606, Revenue from Contracts with Customers, for all private entities that have not yet adopted the guidance. Sometimes, the transaction price includes a discount or a variable amount of consideration that relates entirely to one of the performance obligations in a contract. 2014-09 to annual reporting periods The period of time from the expected issuance of the guidance until its effective date is longer than usual. Just like many other organizations, the Financial Accounting Standard Board’s (FASB) standard setting activities were slowed in 2020 because of COVID-19, and many effective dates were pushed back.. Application of the deferral is to be made at the entity level based on individual revenue streams. The transaction price also is adjusted for the effects of the time value of money if the contract includes a significant financing component and for any consideration payable to the customer. If those goods or services are distinct, the promises are performance obligations and are accounted for separately. For calendar-year end companies that are eligible for the deferral, the effective date is January 1, 2023. (An overview of the new standard is provided in a three-part FASB video series available on the FASB website. The lease accounting standard is not effective for private companies and not-for-profits, until fiscal years beginning after December 15, 2020. As a result, the FASB is proposing to defer, for one year, the effective date of ASU 2014-09 for nonpublic entities, including not-for-profit organizations, that have not yet issued their financial statements. A delay of ASU No. Summary: FASB issued this ASU as a direct result of the effects of COVID-19 on organizations. 2018-08 will be helpful to nonpublic entities as they report funds they receive related to the pandemic. The proposal will feature potential delays to ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and ASU 2016-02, Leases (Topic 842). If the consideration is variable, a reporting organization estimates the amount of consideration to which it will be entitled in exchange for the promised goods or services. Go to Bulletin 2020-47 Opens in a new window The new guidance: What Does the New Revenue Recognition Guidance Do? The new guidance will replace numerous, industry-specific GAAP revenue recognition requirements. The proposal would push the effective date for these entities to fiscal years beginning after December 15, 2019. Effective Date. Meanwhile, FASB considered but rejected feedback asking for a delay in the effective date for ASU No. The guidance in the ASU would be “effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016.” Early application is permitted. Incremental costs of obtaining a contract—A reporting organization recognizes as an asset the incremental costs of obtaining a contract that the reporting organization expects to recover. Effective Date(s) The final Policy is effective January 25, 2023 and will replace the 2003 NIH Data Sharing Policy. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. The new guidance establishes the following core principle: Recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, finalizes effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses, leases, and hedging standards. Given the fluid situation, and with rapidly changing new guidance issued daily, be aware that some or all of this information may no longer apply. Nonpublic business entities would still be allowed to adopt ASU 2014-09 for periods beginning after December 15, 2018. The Accounting Standards Update is available at www.fasb.org. Disclaimer: To the best of our knowledge, this information was correct at the time of publication. On April 21, 2020, the FASB issued for public comment a proposed ASU 5 that would revise the effective dates of both the revenue and leasing standards. A not-for-profit organization that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. Customers – Deferral of the Effective Date, in August 2015, to defer the effective date of ASU No. The Center for Audit Quality (CAQ) has continued to update its COVID-19 resources page. The program offers benefits-eligible faculty and staff the opportunity to receive payment for accumulated unused sick leave at retirement. Step 4: Allocate the transaction price to the performance obligations in the contract. Its objective will be to promote effective implementation and transition to the converged standard. ASU 2019-09. The FASB staff will be drafting a proposal with a 15-day comment period. 2016-02, Leases (Topic 842), 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, and 2016-13, the effective date for PBEs has already passed or nearly arrived; only effective dates for non-PBEs have been delayed. Incremental costs are those costs that the reporting organization would not have incurred if the contract had not been obtained. A public organization is an organization that is any one of the following: What Will the Board Do to Address Issues That May Arise during Transition to the New Guidance? International Financial Reporting Standards (IFRS), Investors’ Bill of Rights and Responsibilities, Business Continuity & Emergency Procedures, White Collar Crime & Embezzlement Investigations, CMG Product: Customized Fixed Income Portfolios, CMG Product: Tax-Aware Asset Management - Rehmann UMA, Congress Passes Additional Coronavirus Relief, Financial resolutions aren't just for the new year, Deals and steals: Preventing hackers this holiday season, Accounting Standards Update No. A nonpublic entity may elect early application, but no earlier than the effective date for public entities. With the COVID-19 pandemic bringing unexpected challenges over the course of the last few months, FASB has officially issued Accounting Standards Update (ASU) 2020-05 providing privately-held entities and private nonprofit organizations with a one-year deferral of the ASC 606, Revenue from Contracts with Customers, effective dates, and ASC 842, Leases. 2014-09 for one year. The FASB also confirmed its decision from April to amend the effective date of its lease accounting standard for private companies and not-for-profits. Targeted Improvements ASU 2018 -11 (issued in July 2018) Narrow-Scope Improvements ASU 2018-20 (issued in December 2018) Leases Codification Improvements ASU 2019-01 (issued in March 2019) Effective Date ASU 2019-10 (issued in November 2019) Effective Date ASU 2020-05 (issued in June 2020) All companies; Key impacts. Additional information regarding this proposal and other measures the FASB is taking regarding COVID-19 may be found in these resources: Journal of Accountancy and FASB Statement. A good or service is distinct if the customer can benefit from the good or service on its own or together with other resources that are readily available to the customer, and the seller’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. The original effective date was FY23. Revenue is one of the most important measures used by investors in assessing a company's performance and prospects. Key impacts. The guidance is also difficult to maintain over time as industries and markets evolve. For nonpublic companies and organizations, the new guidance will be required for annual reporting periods beginning after December 15, 2017, and interim and annual reporting periods after those reporting periods. The proposal will feature potential delays to ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and ASU 2016-02, Leases (Topic 842). Simplifies the preparation of financial statements by reducing the number of requirements to which an organization must refer. As the coronavirus pandemic gripped the world and caused disruption for businesses and organizations of all sizes, numerous standard setters and regulators acted to amend or delay effective dates to give stressed company managers and CPA firm leaders the opportunity to respond to the crisis without having to worry about implementing new standards or rules. coronavirus 2 (SARS-CoV-2) (Coronavirus disease [COVID-19]), amplified probe technique, making use of high throughput technologies as described by CMS-2020-01-R. U0004: 2019-nCoV Coronavirus, SARS-CoV-2/2019-nCoV (COVID-19), any technique, multiple types or subtypes (includes all targets), non-CDC, making use of high throughput technologies as The maximum total benefit is $30,000 per person, per retirement system. The following effective dates should also be noted: Competing grant applications that are submitted to NIH for the January 25, 2023 and subsequent receipt dates; The amount of revenue recognized is the amount allocated to the satisfied performance obligation. A contract includes promises to transfer goods or services to a customer. Presently, GAAP has complex, detailed, and disparate revenue recognition requirements for specific transactions and industries including, for example, software and real estate. For public companies with a December 31 fiscal year-end, ASU2014-09 had an effective date starting on January 1, 2018; for private entities with a December 31 fiscal year-end, the effective date was January 1, 2019. Step 3: Determine the transaction price. A reporting organization typically allocates the transaction price to each performance obligation on the basis of the relative standalone selling price of each distinct good or service promised in the contract. The revenue recognition standard was effective January 1, 2019, for calendar-year-end public companies. Here is a look at the more significant Accounting Standards Updates (ASU) that will still be going into effect for private companies and their effective dates. What happened? An employee benefit plan that files or furnishes financial statements to the U.S. Securities and Exchange Commission. Effective 06/17/2020, NIH will not allow direct charge of canceled travel and conference registration fees due to COVID-19. Accounting Standards Update No. Accounting Standards Update No. Accounting Standards Update (ASU) 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) Effective Dates for Certain Entities provides a limited deferral of the effective dates for implementing previously issued ASU 606 and ASU 842 to give some relief to businesses and the difficulties they are facing during the pandemic. The estimated amount of variable consideration will be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. 2014-09, Revenue from Contracts with Customers (Topic 606) Revenue is one of the most important measures used by investors in assessing a company's performance and prospects. ASU No. The final ASU defers the effective date for all entities. At its June 10 meeting, the FASB voted to propose a one-year deferral of the effective date of ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts in response to implementation challenges resulting from COVID-19. You can contact me at 865-673-0844. In addition to these highlights from the quarter, we have included recent developments from the Governmental Accounting Standards Board (GASB). Additionally, the different effective dates and regulatory capital transition option (as described below) will stretch the changes from 3/31/2019 to 12/31/2022, creating a change management challenge for firms. The board concluded that the guidance in ASU No. On June 3, 2020, the FASB issued ASU 2020-05,1 which amends the effective dates of the Board’s standards on revenue (ASC 6062) and leasing (ASC 8423) to give immediate relief to certain entities as a result of the widespread adverse economic effects and business disruptions caused by the coronavirus disease 2019 (COVID-19) pandemic. This means that a public not-for-profit with a June 30 year end will not have to implement the standard until issuing its June 30, 2021, financial statements. PYA: Healthcare Consulting, Audit & Accounting, Paycheck Protection Program for Small Businesses, Financial Institutions Audit, Accounting & Advisory. For entities that have not yet adopted ASU 2016-13, the effective dates and transition requirements for these amendments are the same as those in ASU 2016-13. Improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets Deferral of the effective date of Topic 606 ASU 2014-09, “Revenue From Contracts With Customers (Topic 606)” ASU 2016-02, “Leases (Topic 842)” The board’s vote changes and clarifies certain aspects of the proposed ASU, the most significant of which extends the Topic 606 deferral to entities beyond those in the franchisor industry. Nonpublic business entities are still allowed to adopt ASU 2014-09 for periods beginning after December 15, 2018. The new guidance specifies when a reporting organization should allocate the discount or variable consideration to one (or some) performance obligation(s) rather than to all performance obligations in the contract. The original effective date … The effective date is the same as the effective date in ASU 2016-13: Not applicable: Loans and investments guide: ASU 2019-05: Financial Instruments-Credit Losses (Topic 326) Targeted Transition Relief: For entities that have not yet adopted ASU 2016-13, the same as ASU 2016-13 FASB Chairman Russell Golden mentioned that the FASB will consider additional deferments, if they become necessary, due to the pandemic. The transaction price is the amount of consideration to which a reporting organization expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. On May 28, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued converged guidance on recognizing revenue in contracts with customers. As noted by the FASB staff in their agenda meeting notes: On Wednesday April 8, in light of the COVID-19 pandemic, the Financial Accounting Standards Board (FASB) voted unanimously to consider changing the effective date of two Accounting Standard Codification updates (ASUs) with looming implementation dates. However, revenue recognition guidance differs in Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS)—and many believe both standards are in need of improvement. The deferment in the proposal would change the effective date for these companies to fiscal years end beginning after December 15, 2021. In this case, the FASB decided that a delayed effective date is appropriate because of the scope of organizations that will be affected and the potentially significant effect that a change in revenue recognition has on other financial statement line items. Who Is Affected by the New Revenue Recognition Guidance? The FASB's joint project with the IASB improves and converges their respective standards in this area. Credit losses. ASU No. Why Do We Need to Improve How Revenue Is Recognized in Financial Reporting? The revenue recognition standard was effective January 1, 2019, for calendar-year-end public companies. Checklists for the effective dates of FASB Accounting Standards Updates (ASUs) and GASB statements are also available. For ASU Nos. For performance obligations satisfied over time, a reporting organization recognizes revenue over time by selecting an appropriate method for measuring the reporting organization’s progress toward complete satisfaction of that performance obligation. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update 2014-09). Costs to fulfill a contract—To account for the costs of fulfilling a contract with a customer, a reporting organization applies the requirements of other standards (for example, Topic 330, Inventory; Subtopic 350-40, Intangibles— Goodwill and Other—Internal- Use Software; Topic 360, Property, Plant, and Equipment; and Subtopic 985-20, Software—Costs of Software to Be Sold, Leased, or Marketed), if applicable. When Will the New Guidance Be Effective? If a standalone selling price is not observable, a reporting organization estimates it. Significant judgments, and changes in judgments, made in applying the requirements to those contracts. The ASU defers the effective date for ASC 842 for private companies and certain not-for-profit entities (“NFPs”) for one year. Relate directly to a contract (or a specific anticipated contract), Generate or enhance resources of the reporting organization that will be used in satisfying performance obligations in the future, Revenue recognized from contracts with customers, including a breakout of revenue into appropriate categories, Contract balances, including the opening and closing balances of receivables, contract assets, and contract liabilities, Performance obligations, including when the reporting organization typically satisfies its performance obligations and the transaction price that is allocated to the remaining performance obligations in a contract. The group will consist of 15–20 specialists representing preparers, auditors, regulators, users, and other stakeholders, as well as members of the FASB and the IASB. ASU 2014-09 addresses revenue recognition for contracts with customers. Guide Bulletin 2020-47: Extension of Temporary Flexibilities Related to COVID-19 This Bulletin announces an extended effective date for COVID-19-related temporary flexibilities. Public business entities, certain not-for-profit entities, and certain employee benefit plans have applied the guidance in FASB ASU No. The new guidance contained in the Accounting Standards Update affects any reporting organization that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). 2018-08 would have aligned that guidance with the revenue recognition deferral. 2014-09, Revenue from Contracts with Customers (Topic 606), Removes inconsistencies and weaknesses in existing revenue requirements Provides a more robust framework for addressing revenue issues, Improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, Provides more useful information to users of financial statements through improved disclosure requirements, and. 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