Case Studies in Not-for-Profit Accounting and Auditing

Chapter 14 NAMING RIGHTS

LEARNING OBJECTIVES

After completing this chapter, you should be able to do the following:

• Apply your understanding of unrelated business income tax issues.

TECHNICAL BACKGROUND INFORMATION

Some not-for-profit entities (NFPs) offer public recognition, such as what are sometimes referred to as naming opportunities, and other rights and privileges to resource providers. For example, an NFP may give resource providers the opportunity to name a building or a portion thereof, based on receiving certain dollar amounts. Alternatively, a college or university may give resource providers the opportunity to name a faculty position and have certain recruiting privileges, based on receiving certain dollar amounts.

FASB defines a contribution as “An unconditional transfer of cash or other assets to an entity or a settlement or cancellation of its liabilities in a voluntary nonreciprocal transfer by entity acting other than as an owner. Other assets include securities, land, buildings, use of facilities or utilities, materials and supplies, intangible assets, and unconditional promises to give those items in the future.” Some exchange transactions may appear to be much like contributions; therefore, a careful assessment of the characteristics of the transaction is required to determine whether the recipient of a transfer of assets has given up an asset or incurred a liability of commensurate value.

The board believes that assessing the characteristics of ...