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Changes to Association Revenue Recognition


By Jeremy Newman CPA A


 with the introduction of FASB ASC 606 Revenue Recognition: Revenue from Contracts with 


The new guidance took effect for associations with  All Generally Accepted Accounting Principles (GAAP) –  with December 31, 2019 are affected.


Some new terms include:  Contract – Agreement between member and association, typically for assessments.


 Performance obligation – An association’s obligation to perform, i.e., incur expenses.


 Transaction price – For most associations, assessments charged to owners


 Contract Liability – Unused reserve fund assessments.


FASB ASC 606 establishes a Five Step Approach for recognizing and measuring assessment revenue:  Identify the association’s contract with members (assessments typically based on the association’s budget).  Identify the separate performance obligations of the contract


20 Community Associations Journal | April 2020 with members (operating expenses, reserve expenses)


 Determine the transaction price (assessment)  Allocate the transaction price (assessment) to the separate performance obligations


  


  transaction (assessment) amounts expected to be collected. An association’s performance obligations (expenses)  Operating assessments are generally considered to be matched in the period operating expenses are incurred.


The performance obligations (expenses) related to  those funds are expended for their designated purpose. Thus, under the new guidance, reserve assessments are 


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