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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