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About FASB Regulations and Using New Deferred Revenue Functionality

Nimble AMS has made enhancements to the revenue recognition engine that allows your association to have much greater flexibility around revenue recognition. This flexibility empowers associations to set up revenue recognition in compliance with updated FASB regulations. 

According to FASB regulations, associations are required to recognize the revenue related to membership and subscriptions in greater detail. Updated FASB regulations want associations to recognize revenue when they deliver the service to the consumer. For example:

  • If you have a publication product with twelve monthly issues shipped over the course of a year, then your association should recognize an appropriate portion of revenue every time an issue is shipped/delivered.
  • If an event registration is sold, then your association should have the ability to recognize the revenue for it on a date when they consider that the service has been delivered (and/or the revenue is guaranteed), which is usually when the event has commenced or completed.
  • If a membership is purchased, your association should recognize the revenue monthly, quarterly, or semi-annually based on the accounting period that you want to follow and the service that you believe has been delivered.

With updates to Nimble AMS made in the Spring '19 release, associations can now set up the number of pieces in which revenue recognition should be broken into, how much each piece will recognize, and when each of those pieces will be recognized. In a nutshell, associations can now configure:

  • if revenue should be recognized in one lump amount or if it should be broken into multiple pieces.
  • when each piece should be recognized.
  • how much each piece of revenue recognition should be.

All existing products and custom products can use these new capabilities. Continue reading to learn how to enable your products to use this enhanced revenue recognition.

All deferred revenue capability that was available prior to Spring '19 is still fully supported with the new functionality. We have just added even more functionality as well as a simpler configuration. So it's a no brainer to switch!

Not quite ready to make the switch? No problem: we continue to support products using the old deferred revenue fields, but encourage you to update your products in time to comply with updated FASB regulations.

Update Deferred Revenue Methods to Use New Deferred Revenue Functionality

The new deferred revenue functionality introduced in Spring '19 is practically ready to use out of the box because it really just comes down to using a new field named Recognition on the Deferred Revenue Method object instead of the legacy fields.

Staff need to populate the new field instead of the old fields, and then an administrator needs to update page layouts to show the right fields. Specifically:

  1. Accounting Staff: Update each deferred revenue method record by manually transferring the value stored in the legacy field (Membership Recognition or Event Recognition) into the new Recognition field. We recommend deleting the value in the legacy field after the transfer to avoid confusion down the road.

    We recommend using a list view for deferred revenue methods to easily see all the information you need in a single window and make inline edits to the records.

    What happens if I leave the legacy fields populated?

    Nimble AMS first checks the new Recognition field. If it finds a value, it uses that value. However, if Recognition is blank, only then does it look to the Membership Recognition or the Event Recognition fields. This ensures backwards compatibility with deferred revenue methods using the legacy configuration.

    In other words, if you've populated the new Recognition field, it makes no difference whether or not the legacy fields are populated (but as mentioned earlier, we recommend clearing it out to avoid confusion, such as when reports are run).

  2. Admins: Modify each of the existing page layouts for the Deferred Revenue Method object by doing the following:

    1. Remove the legacy Membership Recognition (NU__MembershipRecognition__c) field.

    2. Remove the legacy Event Recognition (NU__EventRecognition__c) field.
    3. Add the new Recognition (NU__Recognition__c) field.

      While creating a new Recognition field on the page layout, mark the field as Required

      By default, Nimble AMS includes page layouts for Membership, Registration, and Subscription so be sure to update each one. 

  3. Admins: Set the correct Recognition Picklist Values Available for Editing:
    1. For the Membership record type:
      1. All On Start Date
      2. Frequency
      3. Straightline
    2. For the Subscription record type:

      1. All On Start Date
      2. Frequency
      3. Publication
      4. Straightline
    3. For the Registration record type:

      1. End Date
      2. Event End Month
      3. Event Start Month
      4. Start Date
      5. X Days from Start Date
      By default, because the Membership, Subscription and Registration record types pre-exist in orgs, all picklist values will be available for editing. That is why this step is necessary.
  4. Admins: For the Membership and Subscription Deferred Revenue Method page layouts:
    1. Add the new Frequency (NU__Frequency__c) lookup field for Frequency based recognition support.

  5. Admins: For the Subscription Deferred Revenue Method page layout only:
    1. Add the new Publication (NU__Publication__c) lookup field for Publication Issue based recognition support.

Other Changes to Legacy Functionality

Here are other notable changes made to deferred revenue methods

  • Base Deferred Schedule Calculators Made Global and Extensible: The existing MembershipDeferredScheduleCalculatorRegistrationDeferredScheduleCalculator, and SubscriptionDeferredScheduleCalculator classes have been made global, and virtual, for easy extension. This makes it easier for developers to create customizations to meet unique revenue recognition requirements.

Reference: How Legacy Recognition Used to Work

For reference, the legacy fields only supported the following recognition methods, which is insufficient for the updated FASB regulations:

  • Membership Recognition:
    • Straightline—takes an equal amount of the recognition for each deferral, for a length of a term until all revenue is recognized.
    • All On Start Date—recognizes all of the deferred amount at once on the first day of the term.

      These were also the only available values for subscription deferred revenue methods.

  • Event Recognition:
    • End Date
    • Event End Month
    • Event Start Month
    • Start Date
    • X Days from Start Date

Next Steps

The deferred revenue method documentation was updated in Spring '19 to include the additional capabilities. Specifically, you should read:

  • The overview Deferred Revenue page includes updated general information as well as specifics about new fields for deferred revenue methods like Frequency and Publication.
  • The Create a Deferred Revenue Method is updated to explain all the recognition types available for each record type, and what fields need to be populated based on the selected Recognition.

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