Colleges, Universities Question Whether to Combine Tuition and Housing Fees Under New Revenue Rules

As the not-for-profit sector prepares to adopt new revenue accounting rules, some colleges and universities have questioned whether to start combining tuition costs and student housing fees as one arrangement under the reporting changes, according to FASB discussions. On July 17, the board said tuition and housing agreements are negotiated separately and typically would not have to be combined, but nonprofits need to consider the relevant facts and circumstances surrounding them when making that determination. “I was affiliated with five different universities over course of my career and was aware of how we price things, and the tuition was completely separate from the housing offer that was made to the students and how that was priced,” FASB member Christine Botosan said during the discussions. Botosan went on to say that it would have resulted in “very odd accounting” if an entity had to combine the arrangements and allocate between the two of them. “I think we would have ended up with metrics of revenue that didn’t reflect the economics of the two components as the business model is actually executed.”

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Second Staff Q&A on Credit Loss Rules Issued

Companies wrestling with the technical nuances of estimating credit losses on financial assets can now access a second FASB staff question and answer document to ease the path toward their implementation efforts. FASB released the Q&A document to address 16 questions related to recognition of current expected credit loss, one of the most significant accounting standards to impact banks and other lenders nationwide. The rules, which were developed to be operably scalable and flexible, require companies to apply judgment in estimating expected credit losses, which can prove tricky. Companies raised questions about “acceptable approaches for determining reasonable and supportable forecasts and techniques for reverting to historical loss information” when developing the estimate, according to the main text of the Q&A document. The provisions take effect in 2020 for large calendar year–end public companies. A deferral is in the works for smaller reporting companies, private companies, and not-for-profit organizations.


IASB Issues Proposal on Reporting Deferred Taxes

On July 17, the IASB issued a proposal to narrowly amend income tax rules to clarify the treatment for deferred tax on transactions such as leases and decommissioning obligations. Exposure Draft (ED) 2019-5, Deferred Tax related to Assets and Liabilities Arising from a Single Transaction (Amendments to IAS 12), is aimed at preventing differences in accounting between companies, which would reduce the comparability of financial statements. The proposal would align the accounting for the tax effects of particular transactions with the general principle in IAS 12, Income Taxes, of recognizing deferred tax for all temporary differences, according to the text of the document. If finalized, multinationals and other companies would recognize deferred tax on initial recognition of particular transactions “to the extent that the transaction gives rise to equal amounts of deferred tax assets and liabilities.” Comments are due by November 14.