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| FinREC Proposes Revenue Recognition Guidance Related to Employee Benefit Plans |
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| June 10, 2021 — EBPAQC Alert No. 473 |
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| Dear Center Members: |
| This alert contains information on FinREC's Proposal for New ASC 606 Guidance Related to the Applicability of FASB ASC 606. |
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FinREC Proposes Revenue Recognition Guidance Related to Employee Benefit Plans
The AICPA Financial Reporting Executive Committee (FinREC) is requesting comments on its recently issued working draft of an accounting implementation paper to be included in the AICPA Audit and Accounting Guide, Employee Benefit Plans (Guide), to clarify the applicability of FASB ASC 606, Revenue Recognition, to employee benefit plans.
The proposed guidance clarifies that:
- Employee and employer contributions are not considered revenue to a plan.
- For instances in which this "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 ASC 606.
- In multiemployer plans, a collective bargaining agreement is not considered a contract between the plan and the plan participants, but rather a contract between the employer and the union.
- In situations whereby multiemployer plans enter into contracts with plan participants (for example, when plan participants receive goods or services from the plan, such as books or tuition) 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 606) between the plan and the participant, to the extent that the criteria in FASB ASC 606-10-25-1 and 25-4 are met.
The working draft also includes a proposed exhibit to chapter 2 of the Guide which 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 606.
Comments should be received by July 12, 2021, and sent by electronic mail to Sue Hicks at sue.hicks@aicpa-cima.com.
Click here to read the working draft.
Sincerely,
AICPA Employee Benefit Plans Audit Quality Center |
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