FASB ACCOUNTING STANDARDS UPDATE NO. 2013-06

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Ryan Adams – Staff Accountant

The Financial Accounting Standards Board (FASB) recently issued Accounting Standards Update (ASU) No. 2013-06, Not-for-Profit Entities (Topic 958): Services Received from Personnel of an Affiliate.

The revenue recognition guidance for not-for-profit entities requires that contributed services be recognized at fair value, and that those services should only be recognized if they (1) create or enhance nonfinancial assets or (2) require specialized skills by individuals possessing those skills and typically would need to be purchased if not provided by donation. In practice, diversity exists about whether a recipient not-for-profit entity should consider as a contribution services received from personnel of an affiliate and whether that not-for-profit entity should apply the contributed services guidance.

The ASU requires a recipient not-for-profit entity to recognize all services received from personnel of an affiliate that directly benefit the recipient not-for-profit entity. Those services should be measured at the cost recognized by the affiliate for the personnel providing those services. If measuring the services received from personnel of an affiliate at cost will significantly overstate or understate the value of the services received, the recipient not-for-profit entity may elect to recognize those services at fair value. The amendments in this Update will reduce diversity in practice and enhance comparability of financial information among not-for-profit organizations.

The amendments in this update are effective prospectively for financial statements issued for fiscal years, and interim periods within those years, beginning after June 15, 2014. A modified retrospective approach for all prior periods presented upon the date of adoption is allowed. Early adoption is permitted.

Source: http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176156316498