[Char143]

Hello, I have a random question…

I recently got a job at a non profit organization which collects membership dues in June and January. Who ever renews their membership in June pays for June year 1 until the following June (year 2) and January payments are for the calendar year but they are billed in November and most of the time received at the end of November beginning of December, so they are collected ahead of time (basically members pay for one year but they have the option to pay for the year in June or December when they sign up).

Here is where my problem begins: When I started this job I assumed all the dues collected in june would be broken down and I would put the portion of the dues that were for year 2 to deferred dues liability account- same with the early collection of the January dues. And then I would reconcile the following year. Well according to the CPA I only have to do it for the money collected in advance for the January dues (so all the money collected in Nov-Dec for dues is the only money in deferred dues liability account) when I told him that it’s not what I learned (I learned/assumed that all the money that is not for the current year should be put into deferred dues–so the june payment of dues should be divided by 12 and 6 months of that should be placed in deferred dues) he said, and I quote, “It is actually a moot point since the dues are not refundable the method of recording them as income in the year received except for those billed and collected in the 4th quarter which are properly included started with the period for which they cover. This gives you consistent application of the method employed for GAAP”.

I don’t understand this at all… Is this a non profit thing? I looked for the answer in my FAR book because that is the one I am currently studying for and taking in a few days, and it doesn’t explain this. PLEASE HELP

Sorry if my grammar is bad! I am on my phone typing this up, and I am unable to go back and re read the post. Hope it makes sense

AUD (2/16)-84
REG (05/16)-69 Retake (7/16)-79 (ty ninja MCQ)
BEC-TBD
FAR-9/8/16

[Mayo]

I think there's two ways of thinking about this:.

1. Let's say I pay my dues on December 1, 2013 for the beginning of the year January 2014, then decide I want to call and cancel my subscription. Doesn't the company still keep the money? In other words, signing someone up for the subscription is the actual realization of revenue and not the actual performance of providing the service or product.

2. However, the counter point is that you should still amortize the deferred revenue. After all, there's no guarantee that the customer will cancel anything. Recognizing it fully would only be appropriate AFTER the customer cancels. Otherwise, you must amortize as you provide the service.

At the end of the day it really depends on the nature of the agreement between the customer and the vendor. My feeling is that the codification probably has some language addressing this issue. My gut feeling is that #2 is the way to go.

Mayo, BBA, Macc

[Mayo]

I think there's two ways of thinking about this:.

1. Let's say I pay my dues on December 1, 2013 for the beginning of the year January 2014, then decide I want to call and cancel my subscription. Doesn't the company still keep the money? In other words, signing someone up for the subscription is the actual realization of revenue and not the actual performance of providing the service or product.

2. However, the counter point is that you should still amortize the deferred revenue. After all, there's no guarantee that the customer will cancel anything. Recognizing it fully would only be appropriate AFTER the customer cancels. Otherwise, you must amortize as you provide the service.

At the end of the day it really depends on the nature of the agreement between the customer and the vendor. My feeling is that the codification probably has some language addressing this issue. My gut feeling is that #2 is the way to go.

Mayo, BBA, Macc

[LaxCPA]

You might want to read over FASB 116, it seems like you will have to figure out if the membership dues are an exchange transaction or just a contribution (revenue earned as received). I would lean towards contribution and side with your CPA. Just my two cents, hope that helps!

[LaxCPA]

You might want to read over FASB 116, it seems like you will have to figure out if the membership dues are an exchange transaction or just a contribution (revenue earned as received). I would lean towards contribution and side with your CPA. Just my two cents, hope that helps!

[Char143]

Thank you Mayo and LaxCPA, both answers make sense.

AUD (2/16)-84
REG (05/16)-69 Retake (7/16)-79 (ty ninja MCQ)
BEC-TBD
FAR-9/8/16

[Char143]

Thank you Mayo and LaxCPA, both answers make sense.

AUD (2/16)-84
REG (05/16)-69 Retake (7/16)-79 (ty ninja MCQ)
BEC-TBD
FAR-9/8/16

[Author]

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