The AICPA Financial Reporting Executive Committee (FinREC) issued a working draft of an accounting implementation paper Wednesday that would address revenue recognition implementation for employee benefit plans and would be included in the AICPA Audit and Accounting Guide, Employee Benefit Plans.
FinREC is seeking comments on the proposed implementation guidance, which addresses how FASB’s new revenue recognition standard can be applied by employee benefit plans. FinREC’s proposed implementation guidance, which can be downloaded here, would clarify that:
- Employee and employer contributions are not considered revenue to a plan.
- For instances in which “revenue sharing” exists, any amounts paid to the plan under such arrangements should be reported as a reduction of fees paid by the plan and are not considered revenues under FASB Accounting Standards Codification (ASC) Topic 606, Revenue From Contracts With Customers.
- In multiemployer plans, a collective bargaining agreement is not considered a contract between the plan and the plan participants but rather is a contract between the employer and the union.
- When multiemployer plans enter into contracts with plan participants and the participant pays the plan for those goods or services, the transaction is considered a contract with the customer, within the scope of FASB ASC Topic 606, between the plan and the participant, to the extent that the criteria in FASB ASC Paragraphs 606-10-25-1 and 606-10-25-4 are met. An example of such a situation would occur when plan participants receive goods or services from the plan, such as books or tuition.
The working draft also includes a proposed exhibit for Chapter 2 of the Guide that summarizes typical income (cash inflow) streams in an employee benefit plan, and FinREC’s determination of whether such income streams are within the scope of FASB ASC Topic 606.
Comments should be received by July 12 and can be emailed to Sue Hicks at Sue.Hicks@aicpa-cima.com or mailed to: AICPA, attention: Sue Hicks, 1455 Pennsylvania Avenue, NW, Washington, D.C., 20004.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.