Project Update

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
Next Steps
*Board/Other Public Meeting Dates
Background Information
Contact Information

Project Objective

The 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 Documents

On 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.

*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.
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.
Early Adoption

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 Steps

The Board will continue redeliberations at a future meeting.

*Board/Other Public Meeting Dates

The 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 Information

Issues 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:
  1. Issue 1: Characterizing grants and similar contracts with government agencies and others as (1) reciprocal transactions (exchanges) or (2) nonreciprocal transactions (contributions)
  2. Issue 2: Distinguishing between conditional and unconditional contributions.
Feedback from stakeholders has indicated that despite the degree of existing guidance, there is significant diversity in practice on the conclusions being reached for Issue 1 and Issue 2 for many grants and contracts. In some instances, similar grants and contracts are accounted for as nonreciprocal transactions (generally conditional) by some NFPs and as reciprocal transactions (exchanges) by other NFPs. Although these issues have been a long-standing implementation problem before the issuance of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), the new guidance has placed renewed focus on the issues because of the elimination of limited exchange guidance in Subtopic 958-605, Not-for-Profit Entites—Revenue Recognition, and additional disclosure requirements that do not seem relevant to these types of transactions.

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 Information

Elizabeth Gagnon
Project Manager

Richard Cole
Supervising Project Manager

Brittany Popovski
Postgraduate Technical Assistant

Brian Peek
Postgraduate Technical Assistant