Not-for-Profit Financial Reporting

Chapter 2Exchange Transactions, Contributions, and Gains and Losses

Learning objectives

• Identify key concepts regarding exchange (reciprocal) transactions.
• Identify some of the critical characteristics of contributions and the conditions and restrictions that may be placed upon them.
• Identify how to recognize and report promises to give and contributed services.

Introduction

All engines need some type of fuel to function. Not-for-profits (NFPs) also need fuel (that is, resources) to function and achieve their mission. Exchange transactions and contributions are key sources of fuel that power NFPs to make a vital difference in our society and the world. In this chapter, we will discuss exchange transactions and contributions and how they are accounted for and reported. We will also address the concept of agency transactions.

In June 2018, FASB issued Accounting Standards Update (ASU) No. 2018-08, Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. This standard is intended to clarify and improve current guidance about whether a transfer of assets is an exchange transaction or a contribution. If the donors or grantors receive commensurate value in return for the resources provided, the asset transfer is an exchange (reciprocal) transaction.

For contributions (nonreciprocal transactions), the standard requires that an entity determine whether a contribution is conditional based on whether an agreement includes a barrier that must ...