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FASB Reaches Decisions on Revenue Recognition Guidance for Nonprofits

Progress continues on the Financial Accounting Standards Board’s (“FASB”) project on the revenue recognition of grants and similar contracts by nonprofits. At its Wednesday meeting, the FASB reached decisions on the following matters:

  • The proposed amendments to distinguish between conditional and unconditional contributions will pertain to both a resource provider and a recipient.
  • To satisfy the definition of a “donor-imposed condition,” a right of return or a releasing of the promisor from their responsibility to transfer assets must be present in the agreement. In order to be considered a condition, the agreement must indicate that the recipient is only entitled to the assets if the stipulations in the agreement are met.
  • No additional recurring disclosures will be required for a recipient or resource provider.
  • A nonprofit must apply the guidance regarding a modified transition approach to revenue or expense that has yet to be identified prior to the adoption year according to the guidance. Per this modified approach, a nonprofit must disclose:
    • The scope of and reason for the adjustment in accounting principle; and
    • Details of the reasons for major changes in every financial statement line item in its current reporting period caused by application of the upcoming guidance, compared with the guidance that was in effect prior to the change.
    • Nonprofits can apply the new guidance on a retrospective basis.

The proposed standard will share the same effective date as Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). Companies will have the option to adopt the standard prior to the effective date.

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