1. Changes Are Coming--New Revenue Recognition Standard: Topic 606
Mark Robins
Assurance Director
Aronson LLC |

2. Mark Robins
Mark Robins is a director in Aronson’s Nonprofit & Association Services Group. Prior to focusing his specialization on nonprofit organizations, he spent time with the Employee Benefit Plan Services Group. Mark specializes in assurance and consulting services for foundations, public charities, schools and service organizations. His experience with fair value concepts, investment portfolios, federal compliance and revenue recognition issues allows him to be a valued resource for nonprofit organizations. As an active participant in the accounting profession, Mark has taught several classes on financial reporting and auditing topics. He is also extensively involved in nonprofit accounting research to advance technical compliance and has contributed a number of blog posts to the Aronson nonprofit blog.

3. Scope
Effective date
Adoption
Core principles
Example

4. Scope and Background

5. Scope Excluded Contributions Leases Investments
Equity method investments
Derivatives
Guarantees
Nonmonetary exchanges

6. Effective date Effective for periods ending after December 15, 2018
For example: calendar year 2019
Years ending June 30, 2020
Years ending September 30, 2020

7. Adoption method Full retrospective approach.
All prior reporting periods would be presented as though the new guidance had always been effective.
Certain practical expedients that the organization may choose to apply. The date of the cumulative effect adjustment would be the start of the earliest reporting period presented.
Modified retrospective approach.
Cumulative effect of adopting the new guidance is recognized on the date of initial application.
Comparative periods prior to initial application are not restated.
Organizations using this approach would apply the guidance retrospectively either to all contracts as of the initial application date or only to those contracts that are not completed as of the initial application date.
When using this method, a practical expedient is available for certain contracts that were modified.
An entity may elect to apply the modified retrospective method to either all contracts as of the date of initial application (i.e., 1 January 2018 for a public entity with a calendar year end that does not early adopt the standard) or only to contracts that are not completed as of this date. Depending on how an entity elects to apply the modified retrospective method, it will have to evaluate either all contracts or only those that are not completed before the date of initial application as if the entity had applied the new standard to them since inception. An entity will be required to disclose how it has applied the modified retrospective method (i.e., either to all contracts or only to contracts that are not completed at the date of initial application).

8. Core principles
Revenue should be recognized to depict the transfer of promised goods or services to customers at an amount representing the consideration to which the organization expects to be entitled in exchange for those goods or services.

9. The 5 Steps

10. The 5 Steps Step 1: Identify customer contract
Step 2: Identify performance obligations in the contract
Step 3: Determine the price of the transaction
Step 4: Allocate the transaction price to each performance obligation within the contract
Step 5: Recognize revenue as performance obligations are satisfied

11. Step 1: Identify customer contract
Contract: an agreement between two or more parties that creates enforceable rights and obligations. A contract may take many forms (that is, it may be written, verbal, or implied by ordinary business practices).
Customer: party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration.
Customer – sale of property. Tables and chairs.
It may be a challenge to determine whether certain parties (such as partners and collaborators) are considered customers. Also, an entity may conduct business with a particular counterparty on a regular basis; sometimes, the counterparty may serve as a customer and, other times, the party may serve in another role. Therefore, an entity must consider carefully whether it has promised a good or service to a customer. If the entity does not promise the good or service to a customer, the promise is not a performance obligation subject to the revenue guidance.
Caution: ASU No —Collaborative Arrangements. In November 2018, the FASB issued Accounting Standards Update (ASU) No , Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. The ASU clarifies that it is possible for a promise in a collaborative arrangement to be a performance obligation under Topic 606. Under the ASU, an entity must first determine its unit of account, then whether a collaborative participant is a customer within the context of the unit of account. If the entity concludes that a collaborative partner is a customer, the entity then must apply all of the guidance in Topic 606 to that specific component of the contract. Conversely, if the partner is not a customer, the entity may not recognize revenue from the transaction under Topic 606. Refer to Caution: ASU No —Collaborative Arrangements within the Scope module for further information on the proposed ASU.

12. Step 1: Identify customer contract
Must meet all the following criteria:
It has commercial substance; that is, the amount, timing, or risk of future cash flows is expected to change as a result of the contract.
There is approval and commitment by each party to fulfill its obligations.
The payment terms and each party's rights to goods or services must be identifiable.
It is probable that the organization will collect substantially all the consideration for the exchange of the goods or services.
If the contract with a customer does not meet the criteria at paragraph , the contract should continue to be assessed to determine if the criteria are subsequently achieved. Any consideration received on such contracts should be recorded as a liability unless one or more of the following has occurred: (FASB ASC through 25-8)
a. The organization has no remaining obligations to transfer goods or services to the customer and all (or substantially all) of the consideration promised has been received and is nonrefundable.
b. The contract is terminated and the received consideration is nonrefundable.
The organization has transferred control of the goods and services that relate to the nonrefundable consideration received and no additional goods or services will be transferred to the customer (and no remaining obligation exists for additional transfers to the customer).
If the contract meets the criteria at paragraph at the inception of the contract, a reassessment of the criteria is only required when there is an indication of a significant change in facts or circumstances.

13. Step 1: Identify customer contract
A contract does not exist if each party has the unilateral right to terminate an unperformed contract without compensating the other party.
A contract is unperformed if :
no goods or services have been transferred to the customer, and
no consideration has been received or is entitled to be received in exchange for the goods or services.

14. Step 2: Identify Performance Obligations
Performance obligation – a promise in a contract with a customer to transfer either:
A distinct good or service.
A series of distinct goods or services that are substantially the same and that transfer to the customer in the same pattern.

15. Step 2: Identify Performance Obligations
A performance obligation is distinct if both of the following conditions exist:
The customer can benefit from the goods or service either on its own or with other resources that are readily available.
The promise to transfer the goods or series can be identified separately from other promises in the contract.
A good or service promised to a customer is distinct if both of the following conditions exist: (FASB ASC )
a. The customer can benefit from the good or service either on its own or with other resources that are readily available (In other words, the good or service has the capability to be distinct.), and
b. The promise to transfer the good or service can be identified separately from the other promises in the contract.
Various factors, including whether the organization regularly sells a good or service separately, may indicate whether the customer benefits from the transfer of the good or service on its own or when it is combined with other readily available resources

16. Step 2: Identify Performance Obligations
Indicators that two or more promises to transfer goods or services are not separately identifiable include the following:
The good or service is an input used to create the end product (output) promised to the customer in the contract.
The good or service substantially changes or customizes another good or service promised in the contract.
The good or service is highly dependent on or highly interrelated with another good or service promised in the contract.
The following factors, among others, indicate that a good or service cannot be separately identified: [ ]
The good or service is an input used to create the end product (output) promised to the customer in the contract. The end product might be comprised of multiple phases, elements, or units;
The good or service substantially changes or customizes another good or service promised in the contract;
The good or service is highly dependent on or highly interrelated with another good or service promised in the contract. For instance, if an entity leaves a particular good or service out of a contract, the entity cannot fulfill its promise to the customer.
Contractor example building road or building tunnel.
Under certain facts, an entity can choose to apply the revenue guidance to a combination of performance obligations. Specifically, an entity can choose to apply the revenue guidance to two or more performance obligations as a single unit of account if both of the following are true: [ ]
The performance obligations have similar characteristics; and
The results of applying the revenue guidance to the single unit would not differ materially from applying the revenue guidance to the performance obligations individually.
Observation: Unit of Account. The authoritative guidance defines unit of account as the level at which an asset or a liability is combined or separated for recognition purposes. This definition originates in the authoritative guidance for measuring fair value. [ ]
A series of distinct goods and services may qualify to be combined into a single performance obligation if the customer gets control of the goods and services over the same time period and in the same pattern. [ (b)]
The performance obligations do not have to be part of the same contract
The rights must be enforceable, material, and accumulate based on past purchases.

17. Step 3: Determine the Transaction Price
Transaction price – amount of consideration to which an organization expects to be entitled for providing the promised goods or services to the customer, excluding sales taxes or similar amounts collected on behalf of third parties.
Organizations are permitted to make an accounting policy election to exclude taxes assessed by governmental authorities, and collected by the organization, from the measurement of the transaction price. The election relates only to taxes imposed on and concurrent with specific revenue-producing transactions. The election cannot be made for taxes assessed on total gross receipts or imposed during the inventory procurement process. Sales, use, and value added taxes are examples of taxes within the scope of this election.
An organization may charge a customer a nonrefundable fee at or near the time a contract begins. Such a nonrefundable upfront fee is consideration that should be included in the transaction price of the contract. Unless a distinct good or service is transferred at the time the fee is received, the fee is considered an advance payment for a good or service that will be provided to the customer in the future, and should be recognized as revenue when or as the organization satisfies the related performance obligation
nonrefundable up front fees

18. Step 3: Determine the Transaction Price
Determine the effect of the following and assume the contract will not be renewed, cancelled, or modified:
Variable consideration
Constraints on estimates of variable consideration
Existence of significant financing components
Noncash consideration
Consideration payable to the customer
From an accounting perspective, the most straightforward type of consideration is fixed cash consideration. Other forms of consideration, such as variable consideration and noncash consideration, generally are more difficult to measure.
At times, an entity also may pay consideration to a customer (such as through a rebate or volume discount). As a general rule, an entity has to reduce the transaction price for any consideration that the entity gives to either:
•A customer; or
•A third party who purchases the entity's goods or services from the customer.
An entity must not, however, reduce the transaction price for consideration the entity gives a customer (or third party) for a distinct good or service that the customer (or third party) promises to the entity.
An entity can never recognize as revenue any amount that is not part of a transaction price. An entity recognizes revenue when a customer gets control of a promised good or service (that is, as the entity satisfies a performance obligation). The amount of revenue the entity recognizes is the amount of the transaction price that the entity allocates to the performance obligation. If an amount is not part of the transaction price, an entity can never allocate the amount to a performance obligation. As a result, the entity can never recognize the amount as revenue and the amount does not affect the entity's income statement.
An entity must determine the fair value of noncash consideration at contract inception
Not-for-Profit Entities. Not-for-profit entities often receive goods or services from other parties. A not-for-profit entity must determine whether a good or service received is either noncash consideration (subject to the revenue guidance) or a contribution (subject to the contributions received guidance in Subtopic , Not-for-Profit Entities—Revenue Recognition). [ (a)] In making this determination, some key items to consider are:
•A contribution generally is an amount of cash or other assets received by an entity in a nonreciprocal transfer. In other words, the party making the contribution does not receive anything of commensurate value in exchange for the contribution. A contribution also may be the settlement of a liability. The contributions received guidance applies to any entity that receives contributions—whether or not the entity is a business or a not-for-profit. [ ] An entity must not apply the contributions received guidance, however, to a good or service the customer contributes if the entity and the customer each receive and give equal or similar value. [ (a)]
•The revenue guidance applies to contracts with customers. A customer is a party that contracts with the entity in order to receive goods or services that are an output of the entity's ordinary activities.
Checkmark Illustration: Noncash Consideration Received by a Not-for-Profit. A children's art museum is a not-for-profit entity. The museum allows entrants to either pay a $10 entry fee or give $10 worth of art supplies to the museum. An entrant that provides $10 worth of art supplies to the museum is providing the museum with noncash consideration. The entrant receives admission to the museum, an output of the museum's ordinary activities. The museum follows the revenue guidance to account for the noncash consideration.
Checkmark Illustration: Contribution Received by a Not-for-Profit. A children's art museum is a not-for-profit entity. A local art supply store donates $1,000 worth of crayons, markers, paints, and paper to the museum. The art supply store does not receive anything in exchange for the art supplies. The museum accounts for the art supplies as a contribution.
The accounting rules generally require an entity to reduce the transaction price if the entity pays consideration to a customer. Depending on the facts, an entity may have to reduce the transaction price for either all or a part of the consideration that the entity pays to the customer. The only time that an entity does not have to reduce the transaction price for consideration paid to a customer is when both of the following are true:
•The customer gives the entity a distinct good or service for the consideration; and
•The consideration is less than or equal to the fair value of the good or service that the customer gives to the entity.

19. Step 3: Determine the Transaction Price
Variable consideration is estimated using one of the following methods:
Expected value method – summing the probability-weighted amounts in a range of possible consideration amounts.
Most likely amount method – a single most likely mount within a range of amounts that are entitled to receive.
One method should be used on a consistent basis throughout the contract when estimating the effect of uncertainty on the amount of entitled variable consideration
An organization with a contract containing a bonus for completion before a certain date might use the most likely amount method based on whether or not completion is expected before the specified date. However, a contract with a bonus paying varying amounts based on the number of days to completion would normally require the organization to use the expected value method based on the probability-weighted amount for expected days to completion.
Organizations should update the estimated variable consideration at the end of each reporting period to reflect current circumstances, as well as any changes that may have occurred. Any resulting changes to the transaction price should be accounted for as discussed in paragraph

20. Step 4: Allocate the Transaction Price
Allocate to each performance obligation
Allocate to each performance obligations based on the relative standalone price at contract inception
The standalone selling price is the price at which the organization would sell a promised good or service separately to a customer. The observable price of a good or service when sold separately to similar customers in similar circumstances is the best evidence of a standalone selling price. A contractually stated or list price may be (but should not be presumed to be) the standalone selling price of a good or service. When observable standalone selling prices are not available, the organization should estimate the amount considering all reasonably available information, such as market conditions, information about the customer or class of customer, and organization-specific factors. When estimating the standalone selling price, organizations should maximize the use of observable inputs and utilize consistent estimation methods in circumstances that are similar.
A discount is specific to a performance obligation (or multiple performance obligations) if all of the following are true about the item: [ ]
•The entity regularly sells each distinct item in the contract separately to customers;
•The entity also regularly sells some of the items together at a discount; and
•The discount when those select items are sold together at a discount is basically the same as the discount in the contract. Based on observable evidence, the entity is able to identify the specific performance obligation (or multiple performance obligations) that the entire discount pertains to.
An entity has to allocate contingent consideration entirely to a specific performance obligation (or a specific distinct good or service) in a contract if both of the following are true: [ ; ; BC284]
•This allocation approach matches what the entity expects to receive for a good or service with the related performance obligation; and
•The consideration relates specifically to either: •The entity's effort to provide the good or service; or,
•A result that the entity will achieve for providing the good or service in a certain way or within a certain time frame.

21. Step 4: Allocate the Transaction Price
Estimation methods for standalone selling price:
Adjusted market assessment approach
Expected costs plus a margin approach
Residual approach
An entity's estimate of a standalone selling price has to consider all reasonably available information. This includes information specific to: [ ; BC269]
•The entity;
•The good or service;
•The customer or class of customer; and
•The market.
GAAP provides suitable estimation methods for determining standalone selling prices, including an adjusted market assessment approach, an expected cost plus a margin approach, and a residual approach. If two or more of the promised goods or services in the contract have highly variable or uncertain standalone selling prices, an organization might need to use a combination of these or other methods when estimating the standalone selling prices.
Adjusted Market Assessment Approach
An entity may estimate a standalone selling price by estimating what a customer would pay in the market in which the entity offers the good or service. For instance, an entity may consider the price that a competitor asks for a similar good or service and then adjust the competitor price for the entity's costs and profit. [ (a)]
Checkmark Illustration: Adjusted Market Assessment. An entity manufactures a good but cannot directly observe the standalone selling price of the good. Considering the market in which the entity offers other goods, the entity estimates that a customer would pay $10 for the good. The entity uses $10 as its estimated standalone selling price for the good.
Checkmark Illustration: Adjusted Market Assessment Based on Competitor Price. An entity provides a service as part of a package with other goods and services. The entity cannot directly observe the standalone selling price of the service. Considering the market in which the entity offers the service, the entity finds that a competitor offers a similar service for $100 an hour. The entity considers the effects of its own costs to perform the service and its own profit margin. The entity adjusts the competitor price for the related effects and estimates the standalone selling price of the service to be $105 an hour.
Expected Cost Plus a Margin Approach
An entity may estimate a standalone selling price by adding a profit margin to the costs the entity expects to incur in providing the good or service. [ (b)]
Checkmark Illustration: Cost Plus a Margin. An entity manufactures a good. The entity determines its cost to produce the good is $10 per unit and that the entity's profit margin is $4 per unit. The entity uses $14—the $10 cost plus the $4 margin—as its estimate of the standalone selling price for the good.
Residual Approach
An entity may only be able to estimate the standalone selling price of a particular good or service as the difference between the following amounts: [ (c)]
•The total transaction price of the customer contract; and
•The sum of the standalone selling prices of the other goods and services in the contract that the entity can either:• Directly observe; or
• Estimate in another way.
An entity may use this residual approach only if the price of a good or service either: [ (c); BC271]
•Is uncertain; or
•Varies widely from one transaction to the next.

22. Step 4: Allocate the Transaction Price
Subsequent transaction price changes:
Allocate the change on the same basis at contract inception
Recognized as increases or decreases in revenue in the period the change occurs
The transaction price may change after contract inception for various reasons, such as the resolution of uncertain events or changes in circumstances that affect the amount of consideration the organization expects to receive. If subsequent transaction price changes occur, the organization should allocate the change on the same basis as at contract inception. Price changes allocated to completed performance obligations should be recognized as an increase or decrease in revenue in the period the change occurs. An organization should allocate a change in the transaction price to one or more, but not all, performance obligations or distinct goods or services that form part of a single performance obligation if the criteria described in paragraph are met.
If the transaction price changes, an entity must allocate the change to the performance obligations in the contract. The revenue guidance requires an entity to allocate the change on the same basis that was used at contract inception. [ ] This allocation method may result in an entity allocating some of the change to a performance obligation that was already satisfied; if so, the entity recognizes the amount allocated to the satisfied performance obligation as an increase or decrease to revenue in the period that the transaction price changes

23. Step 5: Recognize revenue
Over a period of time, or
At a point in time
When the customer takes control of the good or service
customer controls an asset only when the customer can do both of the following: [ ]
•Direct the use of the asset (and prevent others from doing so); and
•Obtain substantially all of the remaining benefits from the asset (and prevent others from doing so).
Indicators of Control
Any of the following may indicate that a customer controls a good or service:
•The customer is obligated to pay (and the entity has a right to be paid) for the good or service; [ (a)]
•The customer has legal title to the good or service; [ (b)]
•The customer has the significant risks and rewards of owning the good or service; [ (d)]
•The customer has accepted the good or service. [ (e)]
An entity may identify additional indicators that control has transferred that are not identified in the revenue guidance

24. Step 5: Recognize revenue
Performance obligation is satisfied over time when at least one of the following criteria is met:
As the organization performs the obligation, the customer simultaneously receives and consumes the benefits.
The customer controls the asset as the organization creates or enhances it.
The performing organization has no alternative use for the asset being created (for example, it is not salable to another customer), and it has an enforceable right to receive payment for its performance completed to date.
A performance obligation is satisfied over time if it falls into one of the following three categories: [ ; ]
a.The performance obligation involves only a service. At the same time that the entity provides the service, the customer receives and consumes the benefits of the service. If the entity were to stop providing the service, a third party would not have to reperform the portion of the service completed by the entity if the third party were to complete the rest of the service for the customer;
b.The entity's performance either: •Creates an asset that the customer controls as the asset is created; or
•Enhances an asset that the customer controls as the asset is enhanced; or
c.The entity's performance does not create an asset with an alternative use. The entity has a right to be paid for its performance to date.

25. Step 5: Recognize revenue
Recognizing revenue over time
Output method
Input method
Method should be applied consistently
If one of the above criteria is met, the organization recognizes revenue over time in a manner that reflects its progress toward completion of the performance obligation. For each performance obligation satisfied over time, a single method of measuring progress should be applied. The method should be applied consistently to similar performance obligations and in similar circumstances. Output methods, such as milestones reached or units produced, or input methods, such as machine hours used or labor hours expended, may be used to measure the progress.
When determining an appropriate method of measuring progress, the nature of the promised good or service to be transferred should be considered. (FASB ASC )
Revenue recognized using an output method is based on direct measurements of the value to the customer of the goods and services transferred in relation to the remaining goods and services that are promised in the contract. Revenue recognized using an input method is based on the organization's efforts or inputs to the satisfaction of the performance obligation in relation to the total expected inputs for that satisfaction. (FASB ASC and 55-20) FASB ASC through provide additional guidance for using output and input methods.
A measure of progress should be updated for any changes in circumstances that occur over time impacting the outcome of the performance obligation. Such changes should be accounted for as a change in estimate as discussed in Chapter 1.

26. Example – Membership Dues
The amendments in this Update likely will result in more grants and contracts being accounted for as either contributions or conditional contributions than observed in practice under current guidance. For this reason, clarifying the guidance about whether a contribution is conditional is important because such classification affects the timing of contribution revenue and expense recognition.
The amendments in this Update apply to both resources received by a recipient and resources given by a resource provider, except for transfers of assets from government entities to business entities.

27. Membership dues
The Accounting Peoples Association (APA) requires members to pay annual dues of $1,000
Dues cover a calendar year (same as fiscal year)
Invoiced in October for the following calendar year
Members receive:
Access to industry information/standards ($500)
Advocacy ($500)
The quarterly periodical, Accounting Peoples Today ($100)
Right to be identify themselves as official memberships ($???)
No obligation to renew membership

28. Membership dues Step 1: Identify the contract
The contract is approved and the parties are committed to their obligations.
Can identify each party's rights to the goods or services being provided.
Can identify the payment terms for the goods or services to be transferred.
The contract has commercial substance.
It is probable that substantially all of the consideration will be collected in exchange for the goods or services that will be transferred to the customer.

29. Membership dues Step 2: Identify the Performance obligations
Good or service (or a bundle of goods or services) that is distinct; or a series of distinct good or services that are substantially the same and that have the same pattern of transfer to the customer.
Capable of being distinct. Can the customer benefit from the promised good or service, either on its own or together with other resources that are readily available to the customer?
Distinct within the context of the contract. Is the promise to transfer the good or service separately identifiable from other promises in the contract?
If the NFP promises in a contract to transfer more than one good or service to the customer, in accordance with FASB ASC , the NFP should account for each promised good or service as a performance obligation only if it is (1) distinct or (2) a series of distinct goods or services that are substantially the same and have the same pattern of transfer.
Membership dues often entitle the member to a group of benefits, such as the right to identify himself/herself/itself as a member and use the membership organization's logo, the right to access to “members only” areas of websites, the ability to serve voluntarily on committees, the ability to participate in online forums, or the right to access job postings. In accordance with FASB ASC , if the member benefit is not distinct, then the benefit should be combined with other promised goods or services until the NFP identifies a bundle of promised goods or services that is distinct (that is, general membership benefits).
Helpful in determining whether a member benefit is capable of being distinct is whether the NFP regularly sells the benefit on a standalone basis, which indicates that a customer can benefit from the good or service on its own or together with other resources that are readily available.
For the purposes of this example, the promises to deliver all of these goods and services are distinct. However, the promise to deliver access to the website and the promise to provide advocacy services are delivered concurrently and have the same measure of progress; therefore, they may be accounted for as if they were a single performance obligation (referred to as “membership benefits”) .

30. Membership dues Step 3: Determine the transaction price
Variable consideration
Constraining estimates of variable consideration
Noncash consideration
Consideration payable to the customer

31. Membership dues
Step 4: Allocate the transaction price to the performance obligations
Standalone selling price
If not observable, estimate it
Discounts relate to only one or some performance obligations or all
Material rights

32. Percentage of selling price Allocated to transaction price
Membership dues
Performance obligation
Selling price
Percentage of selling price
Allocated to transaction price
Membership benefits
$ 1,000
91% $
Quarterly journal $ 2% $
$ 1,100
100%
$ ,000

33. Membership dues Step 5: Recognize revenue
At a point in time or over time
A good or service is transferred when (or as) the customer obtains control of that good or service.
Criteria for over time:
The customer simultaneously receives and consumes the benefits provided by the entity's performance as the entity performs.
The entity's performance creates or enhances an asset that the customer controls as the asset is created or enhanced.
The entity's performance does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed to date.
Continuing the example in paragraphs and , the revenue related to the publications would be recognized monthly (as performance obligations are satisfied in separate monthly deliverables, which is a point in time per FASB ASC ). The revenue allocated to the option is recognized when the educational opportunity is provided (if exercised) or the option expires. The revenue related to access to an online database is recognized ratably over the membership period as the customer simultaneously receives and consumes those benefits.
If the member exercises the option to participate in the educational opportunity, the exercise might be accounted for by the association either as a contract modification or a continuation of the existing contract (that is, a change in the transaction price for the contract). (Refer to FASB/IASB TRG Agenda Ref 32, Accounting for a Customer's Exercise of a Material Right; and paragraphs 9—12 of Agenda Ref 34, March 2015 Meeting: Summary of Issues Discussed and Next Steps). If the association accounts for the exercise of the option as a contract modification, then it should apply the guidance in paragraphs 10—13 of FASB ASC If the association accounts for the exercise of the option as a continuation of the existing contract, it should follow the example in paragraphs 14—15 of TRG Agenda Ref 32 and allocate the additional consideration to the educational opportunity along with the amount previously allocated to the option to participate in the educational opportunity.

34. Questions?

35. Mark Robins Assurance Director Aronson LLC mrobins@aronsonllc.com