In early August, the FASB issued a proposed accounting standard update to clarify and improve accounting guidance for contributions received and made.
The proposed update includes 5 items for consideration when making the distinction of contribution vs. exchange transaction which focus on the main point that in order to be an exchange transaction, the resource provider (donor) must receive commensurate value in return for the resources transferred.
The other main clarifying item in the proposed update is to provide guidance on conditional vs. unconditional contributions. The guidance specifies that a donor-imposed condition must have both
- A barrier (which must be overcome) and
- A right of return to the promisor for assets which have already been transferred or a right of release of the promisor from its obligation to transfer assets. So either you get your assets back or you get released from the obligation to deliver assets.
The proposed update provides a flowchart and many examples to assist with implementation of the guidelines if they pass. FASB is asking for comments on the proposed changes through November 1, 2017.
For questions about Nonprofit services contact your MarksNelson professional at 816-743-7700.