After completing this chapter, you should be able to do the following:
Differentiate the three classifications of net assets.
Identify how donor-imposed restriction can be made.
TECHNICAL BACKGROUND INFORMATION
Not-for-profit entities (NFPs) are unique in that they often receive substantial amounts of contributions. These donations can contain donor-imposed restrictions as to their use. Information about these restrictions on the net resources is important to financial statement users. As illustrated in the following, net assets can be broken down into three classes based on the existence or absence of donor-imposed restrictions.
All net assets are classified as unrestricted, unless the net assets result from contributions whose use is limited by donor-imposed stipulations. The stipulations can result in either temporarily or permanently restricted net assets. Without a donor restriction, net assets are unrestricted.
The three classes of net assets are described in more detail in the following diagram:
FASB Accounting Standards Update (ASU) 2016-14, Presentation of Financial Statements of Not-for-Proft Entities, was released on August 18, 2016. The newly released ASU will change the way all NFPs classify net assets ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month, and much more.
