FASB Clarifies and Improves Guidance for
Not-for-Profit Grant and Contribution Accounting
Norwalk, CT, June 21, 2018—The Financial Accounting Standards Board (FASB) today issued an Accounting Standards Update (ASU) that clarifies and improves the scope and accounting guidance around contributions of cash and other assets received and made by not-for-profit organizations and business enterprises.
“The new ASU clarifies whether certain transactions should be characterized as contributions or exchanges,” stated FASB Chairman Russell G. Golden. “It will improve financial reporting by reducing diversity in practice among not-for-profits and other businesses and organizations that make or receive contributions of cash or other assets—most notably in accounting for grants and similar contracts received by not-for-profits from governments.”
The ASU clarifies and improves current guidance about whether a transfer of assets—or the reduction, settlement, or cancellation of liabilities—is a contribution or an exchange transaction. It provides criteria for determining whether the resource provider is receiving commensurate value in return for the resources transferred which, depending on the outcome, determines whether the organization follows contribution guidance or exchange transaction guidance in the revenue recognition and other applicable standards.
It also provides a more robust framework for determining whether a contribution is conditional or unconditional, and for distinguishing a donor-imposed condition from a donor-imposed restriction. This is important because such classification affects the timing of contribution revenue and expense recognition.
The new ASU does not apply to transfers of assets from governments to businesses.
On Friday, September 14 at 1:00 p.m. EDT, the FASB will host a CPE webinar on the new ASU. Registration and other information about the webinar will be announced on the FASB website in the coming months.
Complete information about effective dates is available in the ASU. The ASU, as well as a FASB in Focus overview and an educational video, is available at www.fasb.org.
About the Financial Accounting Standards Board
Established in 1973, the FASB is the independent, private-sector, not-for-profit organization based in Norwalk, Connecticut, that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (GAAP). The FASB is recognized by the Securities and Exchange Commission as the designated accounting standard setter for public companies. FASB standards are recognized as authoritative by many other organizations, including state Boards of Accountancy and the American Institute of CPAs (AICPA). The FASB develops and issues financial accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to investors and others who use financial reports. The Financial Accounting Foundation (FAF) supports and oversees the FASB. For more information, visit www.fasb.org.