Revenue Recognition of Grants and Contracts by Not-for-Profit Entities
Last updated on February 23, 2018. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.
(Updated sections are indicated with an asterisk*)
The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.Project Objective
Due Process Documents
*Decisions Reached at Last Meeting
*Tentative Board Decisions Reached to Date
*Board/Other Public Meeting Dates
Project ObjectiveThe objective of this project is to improve and clarify existing guidance on revenue recognition of grants and contracts by not-for-profit entities.
Due Process DocumentsOn August 3, 2017, the FASB issued proposed Accounting Standards Update, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. The due date for comment letters was on November 1, 2017.
- Download the proposed Accounting Standards Update, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made.
- Read the FASB in Focus which summarizes the proposed Update.
- Read the press release on the proposed Update.
- Read comment letters on the proposed Update.
*Decisions Reached at Last Meeting (February 14, 2018)The Board redeliberated the amendments in the proposed Accounting Standards Update, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, and made the following decisions:
Conditional Contributions—Indicators to Describe a Barrier
The Board decided to clarify and refine the indicators to describe a barrier, including removing the additional actions indicator in the proposed Update.
Contributions Made by a Resource Provider
The Board affirmed that the guidance for distinguishing between conditional contributions and unconditional contributions should be similar for both a recipient and a resource provider.
Recurring Disclosures by Recipients about Conditional Promises to Give
The Board affirmed the existing disclosure requirements about conditional promises to give.
Simultaneous Release of a Condition and a Restriction
The Board decided that the simultaneous release accounting option for restricted contributions could be elected for conditional restricted contributions separately from unconditional restricted contributions.
The Board affirmed that the final amendments should be applied on a modified prospective basis following the effective date to agreements that are either (1) incomplete as of the effective date or (2) entered into after the effective date.
The Board affirmed that for recipients, the effective date of the amendments will align with Topic 606, Revenue from Contracts with Customers. The Board decided that for resource providers, the effective date will be delayed by one year.
The Board affirmed that early adoption will be permitted.
*Tentative Board Decisions Reached to Date (as of February 14, 2018)A summary of decisions reached to date can be found here.
Next StepsThe Board will continue redeliberations at a future meeting.
*Board/Other Public Meeting DatesThe Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.
The following are links to the minutes for each meeting.
|*February 14, 2018||Board Meeting—The Board continued its redeliberations, focusing on indicators to describe a barrier of a conditional contribution, accounting from the resource provider’s perspective, disclosures, simultaneous release, transition, effective date, and early adoption.|
|December 13, 2017||Board Meeting—The Board discussed a summary of comments received on the proposed Update.|
|June 7, 2017||Board Meeting—The Board continued its deliberations, focusing on the definition of a donor-imposed condition, external review comments, cost-benefit analysis, and comment period.|
|April 19, 2017||Board Meeting—The Board continued its deliberations, focusing on right of return or a release of the promisor from its obligation to transfer assets, accounting from the resource provider’s perspective, disclosures, transition, and early adoption.|
|February 22, 2017||Board Meeting—Issue 2: Distinguishing Between Conditional and Unconditional Contributions|
|December 14, 2016||Board Meeting—Issue 1: Characterizing Grants and Contracts as Reciprocal or Nonreciprocal Transactions, and Issue 2: Distinguishing between Conditional and Unconditional Contributions|
|August 31, 2016||Board Meeting—Issue 2: Distinguishing between Conditions and Restrictions for Nonreciprocal Transactions|
|June 15, 2016||Board Meeting—Issue 1: Characterizing Grants and Contracts as Reciprocal or Nonreciprocal Transactions|
|April 20, 2016||Board Meeting—The Board added the Revenue Recognition of Grants and Contracts by Not-for-Profit Entities project to the technical agenda|
Background InformationIssues were raised by stakeholders (including the Not-for-Profit Advisory Committee [NAC], the American Institute of Certified Public Accountants [AICPA] Expert Panels, and others) indicating that there is difficulty and diversity in practice among not for profit entities (NFPs) with the following two issues:
- Issue 1: Characterizing grants and similar contracts with government agencies and others as (1) reciprocal transactions (exchanges) or (2) nonreciprocal transactions (contributions)
- Issue 2: Distinguishing between conditional and unconditional contributions.
Stakeholders also have expressed that there is difficulty in distinguishing between a condition and a restriction, particularly when funds are provided to an NFP with the stipulation of a certain outcome but no return policy is specified. There also is diversity in practice in determining whether the likelihood of failing to meet a condition is remote, which can change when a contribution is recognized. Overall, the diversity in both Issue 1 and Issue 2 occurs for grants and contracts from various types of funders, but government grants and contracts appear to cause the most concern among stakeholders. The conclusions can affect the timing and net asset classification of the revenue recognized in such transactions.
At its April 20, 2016 meeting, the Board voted to add this project to its technical agenda and directed the staff to pursue the approach of clarifying and improving the existing guidance. The Board also directed the staff to perform additional research on the identified issues to best address stakeholder concerns.
Contact InformationElizabeth Gagnon
Supervising Project Manager
Postgraduate Technical Assistant
Postgraduate Technical Assistant