The Pervasive Impact of Revenue Recognition on Independent Schools

The effective date of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers has been deferred for all entities by one year; however, AAFCPAs advises that Independent Schools start preparing now to determine how the new Revenue Recognition Standard affects your financial picture, your stakeholders, and the way you do business.
How may the Standard impact your School? 

  • Key financial measures and ratios may change, affecting external users’ expectations, internal budgeting and compliance with contractual covenants.
  • IT systems may need to be upgraded or modified to capture additional data necessary to support the accounting and disclosures.
  • Accounting processes and internal controls may need to be revised.
  • There also may be a need to maintain parallel records during transition.

The new standard will require significant management judgment – in addition to changing the way many Independent Schools recognize revenue in their financial statements.
What revenue streams may be affected by the new revenue recognition standard?

  • Tuition and fees
  • Summer program income
  • Paid community use of school facilities

School business officers should consider interim reporting practices, and review semesters that cross fiscal years (i.e. summer sessions).  In addition, schools must understand and consider the impact of recognized or deferred revenue on any debt covenants, as well as any potential concern that financial statement users may have regarding profitability changes.   It is important to be proactive so you are able to communicate with lenders, the Board, and parents, and mitigate any concerns that may arise regarding your change in financial position.
If you have any additional question about how the ASU 2014-09: Revenue from Contracts with Customers will impact you directly, please contact your AAFCPA partner, or Tom Muldoon at 774.512.4032,
Presented by Tom Muldoon as a Goldmine Session at the 2016 NBOA Annual Meeting
Tom Muldoon, CPA, CGMA will present 15-minute Goldmine Sessions on this important topic at the National Business Officers Association’s 2016 Annual Meeting in Los Angeles on February 21-24th.  AAFCPAs advises clients on the changes under the new regulations, and provides clear guidance on implementation, and we are happy to share our expertise on this important issue facing business officers of independent schools.  We hope to see you in Los Angeles.  Learn more>>

About the Author

Thomas Muldoon CPA
Tom specializes in providing assurance, tax, and business consulting services to sophisticated nonprofit organizations, including: multi-service human & social service organizations, early education and care (EEC) agencies, independent schools, Massachusetts Chapter 766 schools, and higher education institutions. Tom specializes in audits in accordance with generally accepted auditing standards, Government Auditing Standards, Uniform Guidance and program-specific audits, as well as the Massachusetts Uniform Financial Report (UFR). Tom is a member of AAFCPAs’ Revenue Recognition Task Force, providing consulting solutions to clients for the efficient and effective implementation of the new ASU, including: assessing the impact of the new standards, and guidance throughout the transition process.

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