exchange.

An exchange (or exchange transaction) is a reciprocal transfer between two entities that results
in one of the entities acquiring assets or services or satisfying liabilities by surrendering other assets or
services or incurring other obligations.
contribution. An unconditional transfer of cash or other assets, as well as unconditional promises to give,
to an entity or a reduction, settlement, or cancellation of its liabilities in a voluntary nonreciprocal transfer by
another entity acting other than as an owner. Those characteristics distinguish contributions from:
a. Exchange transactions, which are reciprocal transfers in which each party receives and sacrifices
approximately commensurate value
b. Investments by owners and distributions to owners, which are nonreciprocal transfers between an
entity and its owners
c. Other nonreciprocal transfers, such as impositions of taxes or legal judgments, fines, and thefts, which
are not voluntary transfers.
In a contribution transaction, the resource provider often receives value indirectly by providing a societal
benefit although that benefit is not considered to be of commensurate value. In an exchange transaction,
the potential public benefits are secondary to the potential direct benefits to the resource provider. The term
contribution revenue is used to apply to transactions that are part of the entity's ongoing major or central
activities (revenues) or are peripheral or incidental to the entity (gains).
Note that the definition for contribution is in accordance with FASB ASU No. 2018-08, Not-for-Profit Entities
(Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions
Made This ASU was issued in June 2018, with an effective date that is aligned with FASB ASU No. 2014-09
, as amended by FASB ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of
the Effective Date .
8.6.71 Therefore, a contribution differs from an exchange transaction because an exchange transaction is a
reciprocal transfer in which each party receives and sacrifices something of approximately commensurate value.
Membership Dues

8.6.72 Paragraphs 9–12 of FASB ASC 958-605-55 discuss NFPs that receive dues from their members.
This paragraph and the following paragraph and table reproduce that guidance. The term "members" is used
broadly by some NFPs to refer to their donors and by other NFPs to refer to individuals or other entities that pay
dues in exchange for a defined set of benefits. These transfers often have elements of both a contribution and
an exchange transaction because members receive tangible or intangible benefits from their membership in the
NFP. For example, the exchange portion of member benefits may include a journal subscription, discounted or
free continuing professional education (CPE) classes, conferences and seminars, discounted or free tickets to
seats at performing arts events, discounted services, access to locked website contents or a library, networking
opportunities, or career qualifications. When membership dues carry traits of both contributions and exchange
components, they should be bifurcated as required in FASB ASC 606-10-15-4 (see the “Bifurcation of
Transactions Between Contribution and Exchange Components” section in paragraphs 8.7.02–8.7.06, for
additional discussion on bifurcation). Usually, the determination of whether membership dues are contributions
rests on whether the value received by the member is commensurate with the dues paid. For example, if an NFP
has annual dues of $100 and the only benefit members receive is a monthly newsletter with a fair value of $25,
$25 of the dues are received in an exchange transaction and $75 of the dues are a contribution.
8.6.73 Member benefits generally have value regardless of how often (or whether) the benefits are used. For
example, most would agree that a health club membership is an exchange transaction, even if the member stops
using the facilities before the completion of the membership period. It may be difficult, however, to measure the

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benefits members receive and to determine whether the value of those benefits is approximately commensurate
to the dues paid by the members.
8.6.74 Table 8-1 contains the list of indicators from FASB ASC 958-605-55-12 that may be helpful in determining
whether memberships are contributions, exchange transactions, or a combination of both. Depending on the
facts and circumstances, some indicators may be more significant than others; however, no single indicator
is determinative of the classification of a particular transaction. Indicators of a contribution tend to describe
transactions in which the value, if any, returned to the resource provider is incidental to potential public benefits.
Indicators of an exchange tend to describe transactions in which the potential public benefits are secondary to
the potential proprietary benefits to the resource provider.
Table 8-1
Indicators Useful for Determining the Contribution and Exchange Portions of Membership Dues
Indicator Contribution Exchange Transaction
Recipient not-for-profit entity's (NFP's) The request describes the dues as The request describes the dues as
expressed intent concerning purpose being used to provide benefits to the providing economic benefits to members
of dues payment. general public or to the NFP's service or to other entities or individuals
beneficiaries. designated by or related to the members.
Extent of benefits to members The benefits to members are The substantive benefits to members
negligible. (for example, publications, admissions,
educational programs, and special events)
may be available to nonmembers for a
fee.
NFP's service efforts The NFP provides service to members The NFP benefits are provided only to
and nonmembers. members.
Duration of benefits The duration is not specified. The benefits are provided for a defined
period; additional payment of dues is
required to extend benefits.
Expressed agreement concerning The payment is not refundable to the The payment is fully or partially refundable
refundability of the payment resource provider. if the resource provider withdraws from
membership.
Qualifications for membership Membership is available to the general Membership is available only to
public. individuals who meet certain criteria
(for example, requirements to pursue a
specific career or to live in a certain area).
8.6.75 FinREC believes that membership dues, excluding any amount determined to be a contribution, generally
should be considered an exchange or reciprocal transaction in which the member receives something of value
and in return pays the NFP for the benefits of membership. The exchange transaction should be accounted for in
accordance with FASB ASC 606 as revenue from contracts with customers.
8.6.76 For example, a trade association charges its members annual membership dues that include a
contribution to its educational foundation, which funds a college scholarship for students who major in the
same discipline that the trade association represents. Typically, the membership amount and the contribution
amount are separately identified, and payment of the contribution is optional. In that case, the amounts specified
on the invoice are the amounts to be recognized as membership dues and contribution. However, in the less
likely case that the contribution portion is not specified but a contribution is included as part of the membership
dues, as discussed in paragraph 8.7.06 in the “Bifurcation of Transactions Between Contribution and Exchange
Components” section and paragraph 5.43 of AICPA Audit and Accounting Guide, Not-for-Profit Entities,
the trade association should bifurcate the exchange from the contribution by determining the fair value of the
exchange portion of the transaction (membership dues), with the residual (the excess of the resources received
over the fair value of the exchange portion of the transaction) reported as contributions. The NFP should apply

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the guidance in FASB ASC 606 to the exchange portion of the membership dues and apply FASB ASC 958-605
to the contribution.
Discussion of the Five-Step Revenue Recognition Model Related to the Exchange Aspects of
Membership Dues and Subscriptions
Step 1: Identify the Contract With a Customer
8.6.77 In order for the exchange portion of membership dues, a subscription, a lifetime subscription, or a lifetime
membership to be a contract with a customer, it would need to meet the following criteria as required by FASB
ASC 606-10-25-1 :
a. The contract is approved and the parties are committed to their obligations.
b. The NFP can identify each party’s rights to the goods or services being provided.
c. The NFP can identify the payment terms for the goods or services to be transferred.
d. The contract has commercial substance.
e. It is probable that the NFP will collect substantially all of the consideration to which it will be entitled in
exchange for the goods or services that will be transferred to the customer.
8.6.78 In most cases, NFPs require and receive the payments in advance for memberships and subscriptions,
lifetime memberships and lifetime subscriptions, which are based on pricing and terms established by the NFP.
Therefore, FinREC believes that the criteria for contract existence in FASB ASC 606-10-25-1 generally would be
met for the exchange aspects of memberships and subscriptions, when the order is placed.
8.6.79 In the circumstances in which an NFP bills a member or subscriber for a renewal in advance, prior to
the beginning of the service period, it is unlikely that the requirements in FASB ASC 606-10-25-1 have been
met for the renewal. Even in cases in which the requirements in FASB ASC 606-10-25-1 have been met and
it is determined that a contract with a customer exists, the NFP would need to consider whether either party to
the contract has performed and whether the requirements in paragraphs 1–5 of FASB ASC 606-10-45 have
been met to determine the presentation of the contract. FASB ASC 606-10-45-4 states that an entity would only
recognize a receivable if it has a present right to payment, even though that amount may be subject to refund
in the future. Furthermore, as illustrated by example 38 of FASB ASC 606-10-55 (paragraphs 284–286), an
entity should not recognize a receivable and contract liability in the statement of financial position if the entity
does not yet have a right to consideration that is unconditional (that is, the contract is cancellable at the invoice
date). Therefore, a receivable would not be recorded until, the earliest of satisfying the performance obligation or,
under a noncancellable contract when the entity has an unconditional right to consideration.
Step 2: Identify the Performance Obligations in the Contract
8.6.80 A performance obligation is defined in FASB ASC 606-10-25-14 as a promise in a contract with a
customer to transfer to the customer either:
a. a good or service (or a bundle of goods or services) that is distinct; or
b. a series of distinct good or services that are substantially the same and that have the same pattern of
transfer to the customer.
8.6.81 If the NFP promises in a contract to transfer more than one good or service to the customer, in
accordance with FASB ASC 606-10-25-14 , the NFP should account for each promised good or service as a
performance obligation only if it is (1) distinct or (2) a series of distinct goods or services that are substantially the
same and have the same pattern of transfer.
8.6.82 Membership dues often entitle the member to a group of benefits, such as the right to identify himself/
herself/itself as a member and use the membership organization’s logo, the right to access to "members only"

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areas of websites, the ability to serve voluntarily on committees, the ability to participate in online forums, or the
right to access job postings. In accordance with FASB ASC 606-10-25-22, if the member benefit is not distinct,
then the benefit should be combined with other promised goods or services until the NFP identifies a bundle of
promised goods or services that is distinct (that is, general membership benefits).
8.6.83 A member benefit would be considered distinct, as compared to other promised services included in the
contract, if both of the following criteria in FASB ASC 606-10-25-19 are met:
a. Capable of being distinct. Can the customer benefit from the promised good or service, either on its own
or together with other resources that are readily available to the customer?
b. Distinct within the context of the contract. Is the promise to transfer the good or service separately
identifiable from other promises in the contract?
8.6.84 Helpful in determining whether a member benefit is capable of being distinct is whether the NFP regularly
sells the benefit on a standalone basis, which indicates that a customer can benefit from the good or service on
its own or together with other resources that are readily available. (Example 11, Case E in paragraphs 150G–
150J of FASB ASC 606-10-55; and Example 12, Case A in paragraphs 151–153A of FASB ASC 606-10-55
provide examples of this evaluation that may be helpful for NFPs to consider.) For example, if an NFP provided
free access to its website to members and separately sold that benefit to nonmembers, that benefit is capable of
being distinct.
8.6.85 NFPs are required under FASB ASC 606-10-25-14 to assess contracts with customers to determine
whether there are multiple performance obligations. If so, the NFP is required by FASB ASC 606-10-32-28
to allocate the transaction price to each of the identified performance obligations in an amount that depicts the
amount of consideration to which the entity expects to be entitled in exchange for transferring the promised good
or service to the customer.
8.6.86 For example, a trade association charges its members annual membership dues, and the membership
includes access to an online database, a subscription to its monthly publication (one per month), and discounts
on future educational opportunities. The trade association should assess whether access to an online database,
each of the monthly publications and each discount related to separate educational programs are separate
performance obligations or could be considered to be general membership benefits, and whether the discounts
provide material rights. In accordance with paragraphs 16A–16B of FASB ASC 606-10-25, an entity is not
required to assess whether promised goods or services are performance obligations if they are immaterial in
the context of the contract with the customer, although discounts that provide material rights cannot be deemed
immaterial. Consistent with paragraphs 41–45 of FASB ASC 606-10-55, the right to obtain a discount on future
purchases does not create a performance obligation to which a portion of the transaction price would need
to be allocated unless the discount is considered to be a material right. (If an option provides a material right
to the customer, the customer in effect pays the entity in advance for future goods or services, and the entity
recognizes revenue when those future goods or services are transferred or when the option expires.) "Example
49 — Option that Provides the Customer with a Material Right (Discount Voucher)," found in paragraphs 336–
339 of FASB ASC 606-10-55, provides further guidance.
Step 3: Determine the Transaction Price
8.6.87 As explained in FASB ASC 606-10-32-2, the transaction price is the amount of consideration (for
example, cash payment) to which an NFP expects to be entitled in exchange for transferring promised goods
or services to a member or subscriber (customer), excluding amounts collected on behalf of third parties. To
determine the transaction price, an entity should consider the effects of the following:
a. Variable consideration
b. Constraining estimates of variable consideration
c. The existence of a significant financing component

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 d. Noncash consideration
e. Consideration payable to the customer
8.6.88 In general, subscriptions, memberships, lifetime memberships, and lifetime subscriptions are paid for in
advance by the customer to the NFP or they are bundled with other goods or services (such as conference and
seminars) and amounts paid are generally not refundable. FASB ASC 606-10-32-15 states, “In determining the
transaction price, an entity shall adjust the promised amount of consideration for the effects of the time value of
money if the timing of payments agreed to by the parties to the contract (either explicitly or implicitly) provides
the customer or the entity with a significant benefit of financing the transfer of goods or services to the customer.”
However, FASB ASC 606-10-32-17 provides factors that, if present, indicate that a financing component
does not exist. That paragraph addresses the circumstances in which a customer paid for the goods or services
in advance, and the timing of the transfer of those goods or services is at the discretion of the customer. An
example would be online CPE: The customer pays for the course at the time of purchase and can choose when
to complete the course within a one- or two-year period.

8.6.89 The assessment of what constitutes a significant benefit of financing requires judgment. BC234 of
FASB ASU No. 2014-09 states that “for many contracts, an entity will not need to adjust the promised amount
of customer consideration because the effects of the financing component will not materially change the amount
of revenue that should be recognized in relation to a contract with a customer.” The assessment of what
constitutes a significant benefit of financing will be based upon individual facts and circumstances for each
entity. If an entity concludes the financing component is not significant, the entity does not need to adjust the
consideration promised in determining the transaction price. Under FASB ASC 606-10-32-18, as a practical
expedient, an NFP need not adjust the transaction price for a significant financing component if the NFP expects,
at contract inception, that the period between transfer of the goods or services to the customer and payment by
the customer will be one year or less.
Step 4: Allocate the Transaction Price to the Performance Obligations in the Contract
8.6.90 As explained in FASB ASC 606-10-32-28, for a contract with a customer that has more than one
performance obligation, an NFP should allocate the transaction price to each performance obligation in an
amount that depicts the amount of consideration to which the NFP expects to be entitled in exchange for
transferring the promised goods or services to the customer.
8.6.91 In the case in which there are multiple performance obligations, as required by FASB ASC 606-10-32-29,
the NFP should allocate the transaction price to each performance obligation identified in a contract on a relative
standalone selling price basis. As required by FASB ASC 606-10-32-33, if a standalone selling price is not
observable, the NFP should estimate it. FASB ASC 606-10-32-34 provides examples of suitable methods
for estimating the standalone selling price of a good or service. If the transaction price includes a discount or
variable consideration that relates entirely to one or more, but not all, performance obligations in a contract,
then the requirements in paragraphs 36–41 of FASB ASC 606-10-32 specify when an entity should allocate the
discount or variable consideration to one (or some) performance obligation(s) rather than to all performance
obligations in the contract.
8.6.92 Continuing the example in paragraph 8.6.86, after determining the transaction price, the association
should allocate the transaction price to each separately identifiable performance obligation in an amount that
depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the
promised goods or services to the customer, as required by FASB ASC 606-10-32-28. Thus, if the right to obtain
a discount on the future educational opportunities is a material right, the membership dues should be allocated
among the performance obligations including the discount right.
Step 5: Recognize Revenue When (or As) the Entity Satisfies a Performance Obligation

8.6.93 As explained in FASB ASC 606-10-25-23 , an NFP should recognize revenue when (or as) it satisfies
the performance obligation by transferring a promised good or service to the customer. For the membership

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service or subscriptions or both, whether they are annual or lifetime, the recognition point will depend on the
specific facts and circumstances. A good or service is transferred when (or as) the customer obtains control of
that good or service.
8.6.94 FASB ASC 606-10-25-27 notes that an entity transfers control of a good or service over time, and,
therefore, satisfies a performance obligation over time if one of the following criteria is met:
a. The customer simultaneously receives and consumes the benefits provided by the entity’s performance as
the entity performs.
b. The entity’s performance creates or enhances an asset that the customer controls as the asset is created
or enhanced.
c. The entity’s performance does not create an asset with an alternative use to the entity, and the entity has
an enforceable right to payment for performance completed to date.
8.6.95 For each performance obligation, an NFP should determine whether the performance obligation will be
satisfied over time by transferring control of a good over time or if the NFP satisfies a performance obligation at
a point in time. For performance obligations associated with nonrefundable lifetime memberships and lifetime
subscriptions, if the obligation is satisfied over time, exchange transactions would be recognized as revenue
over an appropriate time period (such as the life expectancy of the member or subscriber) using an appropriate
measure of progress (such as a time-based measure). If the performance obligation is not satisfied over time,
an NFP should consider at what point in time control transfers, based on the following indicators, as explained in
FASB ASC 606-10-25-30:
a. Present right to payment
b. Legal title
c. Physical possession
d. Risks and rewards of ownership
e. Customer acceptance
8.6.96 Continuing the example in paragraphs 8.6.86 and 8.6.92, the revenue related to the publications would be
recognized monthly (as performance obligations are satisfied in separate monthly deliverables, which is a point
in time per FASB ASC 606-10-25-30). The revenue allocated to the option is recognized when the educational
opportunity is provided (if exercised) or the option expires. The revenue related to access to an online database
is recognized ratably over the membership period as the customer simultaneously receives and consumes those
benefits.
8.6.97 If the member exercises the option to participate in the educational opportunity, the exercise might be
accounted for by the association either as a contract modification or a continuation of the existing contract
(that is, a change in the transaction price for the contract). (Refer to TRG Agenda Ref. No. 32, Accounting for
a Customer’s Exercise of a Material Right; and paragraphs 9–12 of Agenda Ref. No. 34, March 2015 Meeting
— Summary of Issues Discussed and Next Steps). If the association accounts for the exercise of the option as
a contract modification, then it should apply the guidance in paragraphs 10–13 of FASB ASC 606-10-25. If
the association accounts for the exercise of the option as a continuation of the existing contract, it should follow
the example in paragraphs 14–15 of TRG Agenda Ref. No. 32 and allocate the additional consideration to the
educational opportunity along with the amount previously allocated to the option to participate in the educational
opportunity.

8.6.98 The following examples are meant to be illustrative, and the application of FASB ASC 606 should be
based on the facts and circumstances of an entity’s specific situation.
Example 8-6-3 — Subscriptions Received as Part of a Membership

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