United States

Proposed clarifying guidance for contributions received and made


To clarify the accounting guidance for contributions received and contributions made, the Financial Accounting Standards Board (FASB) recently issued a proposed Accounting Standards Update (ASU), Not-for-Profit Entities (Topic 958): Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made. If finalized, the proposed ASU would provide:

  • Clarifying guidance for evaluating whether a resource provider is receiving value in return for the resources transferred, which will help organizations decide whether transactions should be accounted for as contributions or as exchange transactions. Contributions are accounted for in accordance with Topic 958, “Not-for-Profit Entities,” of the FASB’s Accounting Standards Codification, whereas exchange transactions are subject to other guidance (e.g., Topic 606, “Revenue from Contracts with Customers”).
  • A more robust framework for determining whether a contribution is conditional or unconditional, which affects the timing of the revenue recognized. The proposed ASU would require an entity to determine whether a contribution is conditional on the basis of whether an agreement includes a barrier that must be overcome and either a right of return of assets transferred or a right of release of a promisor’s obligation to transfer assets. Unconditional contributions are recognized immediately and classified as either net assets with restrictions or net assets without restrictions. Conditional contributions received are accounted for as a liability or are unrecognized initially until the barriers to entitlement are overcome, at which point the transaction is recognized as unconditional.

Although the accounting for contributions is primarily an issue for not-for-profit entities, the proposed ASU also would apply to all entities that receive or make contributions of cash and other assets. The proposed ASU would not apply to transfers of assets from the government to business entities.

A public company or a not-for-profit entity that has issued, or is a conduit bond obligor for, securities that are traded, listed or quoted on an exchange or an over-the-counter market would apply the new standard to annual reporting periods beginning after December 15, 2017, including interim periods within that annual period. All other entities would apply the standard to annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption of the amendments in this proposed ASU would be permitted.

The proposed ASU is available for comment until November 1, 2017.