Case Study 10


Learning objective

  • Identify the accounting treatment for endowments received by a not-for-profit.


FASB Accounting Standards Codification® (ASC) defines a donor-restricted endowment fund as

an endowment fund that is created by a donor stipulation (donors include other types of contributors, including makers of certain grants) requiring investment of the gift in perpetuity or for a specified term. Some donors or laws may require that a portion of income, gains, or both be added to the gift and invested subject to similar restrictions.

If a not-for-profit (NFP) is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA), the amount of the fund that must be retained in perpetuity is determined in accordance with explicit donor stipulations or the amount that is in the absence of explicit donor stipulations, the NFP’s governing board determines what must be retained (preserved) in perpetuity consistent with the relevant law.

In states that have enacted a version of the Uniform Management of Institutional Funds Act of 1972 (UMIFA) or states whose relevant law is based on trust law, at least the amount of the original gift(s) and any required accumulations is generally considered to be not expendable.

The primary difference between UPMIFA and UMIFA is the concept of historic dollar value. Under UMIFA, asset growth and income of an endowment could be appropriated for program purposes, subject to the ...

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