5 Ways To Get Schooled On Revenue Recognition
Nonprofit accounting isn’t as simple as balancing the books. Many organizations have a variety of revenue streams and properly attributing revenue to each is often a differentiator between a quality financial report and when that leads to trouble down the line.
During their discussion, “Not-for-Profit Revenue Recognition Panel” at the American Institute of Certified Public Accountants (AICPA) 2017 Not-For-Profit Industry Conference, Richard Cole, supervising project manager for the Financial Accounting Standards Board, Stuart Miller, partner at Crowe Horwath, and Kerri Tricarico, associate vice president and controller at New York University (NYU), discussed the finer points of revenue recognition.
- Revenue recognition, as it relates to tuition and fees at NYU, was among the topics discussed during the panel. Key guidance provided included:
- Identify the contract. At NYU, a contract exists when a student pays the non-refundable admission deposit and enrolls in classes online. NYU recognizes contract liability in deferred revenue for the deposit and all payments made until satisfaction of the performance obligation commences;
- Identify the performance obligation. NYU treats net tuition and fees, student housing, and dining as separate, but similar, performance obligations;
- Determine the transaction price. NYU treats the transaction price as gross tuition and fees net of financial aid awards. Department of Education sources including Pell Grants and Federal Direct Loan Program are seen as satisfying students’ balances and are not nets against revenues. Tuition remission is treated in a similar manner;
- Allocate the transaction price to the performance obligations in the contract; and,
- Recognize revenue when or as the entity satisfies performance obligations. For instance, NYU will recognize revenue ratably over the semester beginning after the refund period and through the last day of the semester.