Accounting and Reporting for Not-for-Profit Organizations

Case Study 5

Contribution Concepts

Learning objectives

• Identify the appropriate accounting for recording and recognizing contributions.
• Identify when to record an unconditional promise to give.
• Determine how to measure unconditional promises to give.

Highlights

FASB Accounting Standards Codification^® (ASC) defines a contribution in FASB ASC 958, Not-for-Profits Entities, as

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.

In order to qualify as a contribution, a donation must be unconditional. Unconditional contributions are measured at the fair value of the assets or services received or promised, or the fair value of the liabilities satisfied. Unconditional contributions are recorded as contribution revenue and contribution received when the unconditional promise is made. Unlike restrictions that impact how a donation is recorded, a condition would impact when a contribution is reported. Distinguishing between a condition and a restriction requires judgment.

A condition occurs when a donor includes a barrier that must be overcome and a right of return or right of release if the barrier is not overcome. FASB Accounting Standards Update (ASU) No. 2018-08, Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, identifies ...