Question

nonprofit collects recyclable bottles. When someone brings ina bottle the nonprofit gives the individual the 5 cent deposit. Thenonprofit then washes the bottle and returns them to a facilitythat pays the nonprofit 8 cents. How much revenue should thenonprofit record for each bottle? why

Answer 1

ANSWER

The Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, Topic 606, is effective for all entities, including nonprofits.

As per the new standard there are five steps to be completed at the contract level for revenue recognition. The five steps are as follows:

Step 1: Identify the contract with a customer i.e. selling of bottles
Step 2: Identify the performance obligations i.e. providing them with washed bottles
Step 3: Determine the transaction price i.e. 8 cents
Step 4: Allocate the transaction price to the performance obligations
Step 5: Recognize revenue when or as the entity satisfies performance obligations i.e. when bottles are delivered.

Thus, non profit can recognize 8 cents as revenue

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